>> this is "the journal." the headlines. the gloves come off in the german parliament as the opposition and the government debate next year's controversial budget. the u.s. tries to keep the latest round of middle east peace talks moving. britain gets ready to greet the pope. captioned by the national captioning institute --www.ncicap.org-- >> the german government and the opposition had some fears exchanges in parliament wednesday over the coalition's budget for next year. the opposition says the

austerity plans are socially unjust. the government says the cuts are fair and necessary. chancellor angela merkle was forced to defend her record on the economy, unemployment, and inflation in the face of biting criticism. >> there was a tough job awaiting chancellor merkle on wednesday morning. she had to defend the biggest spending cuts in german postwar history. the chancellor started by drawing attention to previous government shortfalls. >> it was not individuals living beyond their means. it was those in charge who could not muster the energy to ensure this country's future. that is what we are changing. >> she also pointed out her success in shielding the country from the worst effects of the economic crisis. >> 2 million more or 2 million less unemployed is a central measure of fairness in this country. if you are going to talk about fairness, work must be at the

core of the matter. >> led by the social democrats, the opposition tore into the planned budget. they called it proved that the center-right coalition was a stooge of big business and the rich. >> from the beginning, you and your coalition partners had no idea what was good for this country as a whole. when you govern, you are basically just serving your clients' interests. >> merkle dismissed the attacks as backward looking rancor in place of constructive ideas. she said the opposition had none. >> u.s. middle east envoy george mitchell says israel and the palestinians are making progress in resolving the dispute over jewish settlements. he said the u.s. feels encouraged about prospects for an accord. mitchell was speaking after a second day of meetings between the israeli prime minister and

palestinian leader, brokered by washington. >> a united front, perhaps. but behind the scenes the u.s. is believed to be putting pressure on israel to compromise. clinton believes the two sides are serious about breaking the deadlock in the talks. >> that are getting down to business and they have begun to grapple with the core issues that can only be resolved through face-to-face negotiation. i believe that are serious about reaching an agreement that results in two states living side by side in peace and security. >> an israeli freeze on new settlement building expires at the end of this month. the palestinians say they will quit the talks if building resumes. but after the two sides met on wednesday night the u.s. envoy to the middle east said they were making progress on the

matter. >> i will say that the leaders are not leaving the tough issues to the end of their discussions. they are tackling up front, and did so this evening, the issues that are at the center of the israeli-palestinian conflict. we take this as a strong indicator of their belief that peace is possible. >> the need for an agreement remains apparent. the israeli air force struck does that after militant palestinians fired rockets into israel in an apparent attempt to derail the peace talks. >> a roadside bomb has killed 10 often-duty iraqi soldiers after exploding near their bus. six others, including civilians, were injured. the city is considered al qaeda's last urban stronghold in iraq. there are daily attacks despite

numerous security sweeps and arrests. medical forces say shots fired by afghan police have killed at least one demonstrator after anti-american protests turned violent. thousands of protestors hit the street of the capital. police say they fired warning shots when the crowd tried to overcome their kids. doctors at local hospitals say at least one person was killed. afghanistan has seen a string of protests aimed at plans of a radical u.s. pastor to burn the koran. lower saxony is set to become the first german state to offer official islamic religion instruction in schools. in 2012, religion clauses will be offered in schools that have a sufficient number of muslim students. trial programs like this one in cologne are in place in several german states. in many cases, the curriculum covers is lummox duties --

islamic studies instead of religious instruction. programs have been hampered by the absence of a recognized islamic institution in germany that can help develop them. france has hit back at the eu accusing is just as commissioner of overstepping the mark in the criticism of parises expulsion of roma migrants. it was compared to their prosecution during world war two. she has threatened to fast-track legal action. president nicolas sarkozy denies targeting roma minority specifically and has described reding's remarks as unacceptable. france's lower house has passed a bill to raise the minimum retirement age in the country from 60 to 62. supporters of the legislation say it will save the state pension fund 70 billion euros. outside the national assembly, thousands attended a protest

rally by trade unions. inside parliament, opposition leaders protested the planned reforms. >> scenes of pandemonium in france's national assembly as left-wing lawmakers run after the conservative parliamentary president, demanding his resignation. the socialists were trying to get floor time for all 150 of their delegates to delay their vote, but were thwarted by the conservative majority. >> the socialists were not able to present a better suggestion for pension reforms. >> france is under pressure to reduce its government deficit, but the proposed reforms are not ambitious. the bill will raise the retirement age from 6262 -- still significantly lower than -- from 60 to 62 -- still

significantly lower than other european countries. in france, it is a lifestyle issue. trade unions have been protesting for the last two weeks. >> we do not accept that 95% is financed by the middle and lower classes. >> at the end of the day, the left opposition was overpowered. social -- the social minister pepper for plans coasted through on a have the conservative majority, giving nicolas sarkozy his biggest political victory of the year. >> we have a depressing anniversary. >> september 15 went down in history. it is the second anniversary of the collapse of lehman brothers, which contributed to the near collapse of the u.s. financial system. many investors in europe lost massive amounts of money. in france, around 150 people joined a demonstration on wednesday. the accused large banks such as citibank of not having done

enough to compensate the victims of the lehman brothers collapse. they also feel the german government failed to pass legislation. the european commission launched a bid wednesday to, for what it billed as wild west territory in the financial market. it is proposing -- it is proposing curbs on speculative trading. the european internal market commissioner said the rules were necessary to protect vulnerable economies and assure markets that all of europe is operating under a single rule book. >> see you stopped short of bands on speculative trading but issued an outline of new rules that would put markets under new scrutiny. here come speculative short- selling is conducted outside of stock exchanges, largely unregulated. >> we have to limit of this speculation by shedding

light -- by forcing people to be transparent. we have to know on all of these markets, with the americans and the other regions, who is doing what. >> the e.u. once traders to keep a daily record of the transactions. currently, the only record of many multi-million dollar deals is a fax. european watchdog based in paris would have the authority to halt short-selling for up to three months. until now, if you states have acted unilaterally. in may, germany band naked short-selling without consulting brussels first. a lot has happened since then. it looks like the european commission is trying to catch up. >> we have to live in these high speed times, where markets develop more quickly than the politicians and their democratic decisions. >> critics say the proposals are insufficient. at the height of the financial

crisis, many in brussels were calling for a complete ban on short-selling. two years later, the only result is a few more regulations for traders. >> on the second anniversary of the collapse of lehman brothers, european markets pushed further into negative territory. we have this report from the day's trading in frankfurt. >> crying over spilt milk is not the type of behavior you generally find on the frankfurt floor. one looks into the future. on the second anniversary of the lehman insolvency, it is different. everybody remembers what they felt when they heard the news. impossible. how can something like that happen? everyone remembers the kind of hopelessness and desperation they felt when the financial crisis unfolded in the days and months after that. the bad thing is the crisis is not over. everybody here knows that, despite all hopes to the contrary. and one knows there is still a lot of work to do to overcome it.

>> that was frankfurt. looking at the markets in more detail, we stay in frankfurt. the dax indexx closed at 6152. the blue-chip index closed at 2794. on wall street, the dow jones industrials closed at 10,532. the euro is trading for $1.3011. the world trade organization has offered the u.s. government to withdraw subsidies it pays the airplane maker boeing. the wto backed european control -- european complaints the aerospace giant benefited from financial aid banned under the international competition rules. the u.s. says the report includes, "a number of inaccuracies." earlier this year, the wto ruled against airbus for similar

breaches of competition rules. deutsche telekom says its executive is under investigation for suspected bribery in macedonia and montenegro five years ago, when oberman was head of the mobile phone division. the investigation was launched following requests from u.s. legal authorities. >> telekom is in trouble again. several chief executives are under investigation for bribery allegations. investigators searched headquarters and private apartments for evidence. the alleged crimes took place abroad. >> a money trail has been identified at a foreign subsidiary, which gives rise to suspicion the money ended up in the pockets of officials and government employees in the country in question by at dummy

countries and the may contract. -- and dummy contract. i cannot comment on the eventual result of our investigations. >> companies in the telekom group are alleged to have tried to squeeze competitors out of the market in 2005 to give it a group competitive advantage in macedonia. the allegation speak of payments totaling 30 million euros. telekom rejected the accusations in a written statement. >> the chairman of the board rejects the criminal allegations as false. we do not tolerate corruption in any area of the international company. >> the corruption investigation was instigated by the u.s. securities and exchange commission. >> britain is making final preparations for the arrival of pope benedict xvi, who begins a

four day visit on wednesday. his first stop will be edinburgh, where he is scheduled to meet queen elizabeth. later he will celebrate a mass in glasgow. he will spend two days in london and attended a mass in birmingham. he will also meet with the archbishop of canterbury, leader of the anglican church. our correspondent will be travelling with the pope on this visit. he joined us earlier from rome to tell us more about the background to the trip. >> when the pope visits countries in modern times, it is mainly to browse the faithful and show the flag, as it were. this is it has a particular significance because it is the first time the pope has been invited on the state visit to britain. this is in the current text of mutual distrust and suspicion. in recent years, the relations

between the british royal family and the papacy have been cordial. this is a very significant gesture of friendship and good will. we are told it is going to be watched by about a billion people on their television screens around the world. >> there is also some controversy surrounding this trip. what is the story there? >> their are small but militant anti-catholic groups in britain. they include the rights people, atheists, people complaining about the cost of the trip, and so on. the child abuse scandal that has beset the catholic church weighs very heavily on the hearts of all catholics, and certainly the pope. that could overshadow the trip to some extent. on the other hand, most people think it is fair that this ancient institution, which has existed for many hundreds of years, has a right also to celebrate the good things it has achieved in those hundreds of years. that is what is going to be doing in the next few days.

>> thank you very much. >> we will be back in a minute with in depth. do not go away.

>> welcome back. the next few months are likely to be crucial for german chancellor angela marco. she is under pressure for an unpopular decision to extend the operating life of the country's nuclear power stations and an austerity package which critics say targets the weakest in society. she has been slammed for her leadership style and has been accused by some in her conservative party of drifting too far to the left. as parliament resumes after the summer break, merkle has signaled a new resolve to deal with hurt disasters -- her detractors. but she may be facing an uphill struggle. >> wednesday's parliamentary debate was chancellor merkle first appearance since the

parliamentary summer break. she and her government faced criticism for the vacation for appearing indecisive and lacking leadership. she appears determined to put an end to that perception and present a new dynamic persona. >> this will be the decision making to set the course on issues that will effect a new decade in germany. that is what we aim to do and that is what we will do. >> the chancellor has displayed a more assertive leadership style, pushing through a rapid decision in her cabinet on extending the life of germany's nuclear power plants. in another new development in her government's style, she publicly explained the decision she pushed for. >> we want to enter the era of renewable energy sources by bringing industry and ecology closer together, not by pitting them against each other all the time. that is a concept worth pursuing. >> it chancellor's unusually direct explanation is seen by observers as aimed at her own

christian democrats, in response to their apparent loss of identity. at a recent party conference, the choir sang songs -- some religious and some traditional -- meant to perpetuate the feeling of the good old times, the conservative view of the world. at the nearby annual congress of germans displaced at the end of the war, the chancellor was criticized from among her own ranks. some felt she was not being conservative enough. >> what we are seeing at the moment is just the government picking off issues as it works through them. it no longer appears able to explain what ideas its work is based on and why it take certain decisions. >> that is why it is important for us to have a debate on whether people still feel at home in the conservative party. it is a fundamental debate. the political party can only survive if it takes care of that

in the future. >> the new angela merkle appears to want to lead the debate, whether in the party or in parliament. she said she will not shy away from clashes in doing so. >> in our country, each exchange of opinions must take the form of an argument. so be it. but such disputes will be necessary if we are to find the right answers. we stand by that. in the end, majority decisions will be made. we feel that is the right course. >> much has been made in the media of the new at marco and her new leadership style. she has taken a political risk by promising change. now she must show the nation is more than just window dressing. >> an important debate for chancellor merkle. we asked simon young how well she did. >> this was a very combative angela merkle we saw today. she vigorously defended her government's record.

she said they had been focused on dealing with the financial crisis, reducing the deficit. she said that her main focus was the -- to get the german economy on a firm footing for the future. she was very harshly attacked by the opposition, but fought back and said that the opposition parties have not solved the problems when they had the chance. this certainly is a relaunched, more robust angelo merkle we are seeing. the question is will it last. >> how serious are the difficulties the governing coalition is facing at the moment? >> they have a number of problems. chief among them perhaps is the decision to extend the life of germany's nuclear power plants. it is a very unpopular decision was criticized by opposition parties today, saying that the government had simply keeled over to pressure from the energy

companies. indeed, putting through their whole program of spending cuts, which the opposition criticizes as targeting the worst off in society while letting the banks go free -- these are arguments that have to make. the coalition is also riven by internal discord. the chancellor has to keep troops in line. it is going to be a tough few months ahead. >> merkle seems to be drawing fire from all sides. any sign she will not survive this political firefight? >> i do not see an immediate challenge to her as chancellor, but there has been public debate in recent weeks about the soul of the party, with many in the christian democrat party feeling she has moved it to far to the left and she tries to modernize and go after new votes. people say she has let the conservative wing behind a she has done that. indeed, several senior

conservatives have stepped down from political office in recent months. there is a danger angela marco could look isolated. but i do not think there is a direct challenge to her as chancellor at this time. >> simon young, thank you. one of the parties that appears to have the -- have benefited from the difficulties within the governing coalition is the green party. its approval ratings over took more mainstream parties such as the social democrats in some places. there are particularly popular in urban areas. some predict the could be the strongest party in the capital next year. the greens already have experience in national government as part of the coalition with the spd. the greens are determined not to let their renewed popularity go to their heads. >> germany's greens have a lot to laugh about at the moment. they are posting their highest ever approval ratings to route the country.

-- throughout the country. the leader says the greens must keep their feet firmly on the ground. he says the party is under no illusions. it's party is largely due to disappointment in angela merkle 's government. >> it is amazing what they are doing in berlin. they are tearing each other apart, challenging each other's authority. no plan, no direction. overseeing it all, the chancellor can never make a decision. >> of local villagers are campaigning against the planned underground storage facility for co2. fundamental green causes have now entered the mainstream. the greens have fought successfully to become a major party. >> over the years, the greens have not only battled to enter regional parliaments. they have also doubled for specific political issues. the things the greens were saying 10 years ago are things everyone is saying now. >> the surge in popularity may have taken the party somewhat by

surprise. now the grains policy needs to be realistic in today's world and remain true to the environmentalist platform. that can be a difficult circle to square. but it is something many green party politicians have experience with. >> we are already eight major party with 30% support on a municipal council. it is not just a matter of scoring points with environmental and transfer policies. we have to implement social and economic policies as well. >> the greens are loath to name a future coalition partner. the party says that will always depend on the best strategy for issues like sustainability and social justice. >> it is important for the greens to gain even more support, joining a government with 50% of the vote. it makes the government that bit greener. >> the greens at no longer see themselves as the eternal junior

partner in a coalition. but the party will face internal debate about its future direction if its popularity continues to grow. >> that has been more in depth. please stay tuned.