Chancellor Angela Merkel began by looking back at the barbaric attacks in Paris and the need for a "worldwide fight against Islamist terrorism". The impressive demonstration in Paris made it clear that we are prepared to stand up for our values; for democracy and liberty. These are not values that we can take for granted, however; we must always be ready to fight for them.

A violation of the European peace order

With a view to the conflict in Ukraine, the Chancellor said that the annexation of Crimea is a "fundamental violation of the principles of Europe’s peace order". There can be no military response. This makes the sanctions imposed on Russia essential, until such time as a solution is achieved. The current conflict in eastern Ukraine must be resolved at diplomatic level on the basis of the Minsk Protocol.

Huge economic challenges

Germany currently holds the G7 Presidency and has put on the agenda primarily those issues that affect the long-term development of the world. The Chancellor gave the examples of climate change, resistance to antibiotics and empowering women.

Although the euro crisis is now under control, it is not yet over, she said. Europe is still not competitive enough. Pro-growth policies are needed that foster state and private investment.

Respect for the independent decision of the ECB

In response to the decision of the European Central Bank (ECB) to buy government bonds the Chancellor said that whatever the ECB decides is an "independent decision of the European Central Bank". And she added, "In Germany we have a long tradition of respecting the independence of central banks".

But as a politician she said, this must not distract us from the fact that, "the actual impetus for growth must come from a sound framework, and it is the job of politicians to put that framework in place". The Chancellor praised reforms in Italy and the new course adopted in France. She had special praise for the reform efforts made in Spain, Portugal Ireland and Greece. "But we have lost a lot of time already. Every day that passes without adjustment mechanisms and without any gain in competitiveness is a lost day for the unemployed in Europe."

On the decision of the European Central Bank

The European Central Bank intends to inject more than one trillion euros to revitalise the economy in the euro zone. From March 2015 until September 2016 it is to buy bonds worth 60 billion euros a month, announced ECB President Mario Draghi on Thursday (22 January 2015) in Frankfurt am Main. This is intended to avert the risk of deflation – a downward spiral of sinking prices and a contracting economy.

Specifically, the plan provides for the purchase of bonds from banks and other financial institutes on a massive scale. The ECB will only buy bonds that have already been released. The financial institutes will thus receive fresh cash, which the ECB presumes will be profitably reinvested in view of the low interest rates. The banks should then step up lending, which should inject new life into the economy.

Industry 4.0 to generate more jobs

High-quality jobs must be created. Angela Merkel underlined the importance of digitalisation in this context. The EU is working to put in place an enabling environment. A balance must be achieved between the need for individual data privacy and the liberty to use data to create new products.

In this context the Chancellor looked at Industry 4.0 – merging traditional industrial manufacturing with the internet and digitalisation. With a view to developments in the USA and Asia, Angela Merkel urged Europe to become faster so that it is not left behind. Europe has not yet won the race, she said.

Demographic change in Germany

Germany has demonstrated that pro-growth policies and sound public financial management can go hand in hand, said the Chancellor. In 2014 Germany balanced its national budget with no new borrowing. In view of the "massive demographic change" robust growth is needed to reduce debts. We must not leave mountains of debt for the next generations, crippling their scope for development. Over the next 15 years Germany will have to cope with the loss of six million workers, reported the Chancellor.

Currently, more people are working than ever before, which is why Germany has become such an attractive destination for immigrants. "And we want to stay attractive," said the Chancellor.

Angela Merkel advocates free trade agreement

Angela Merkel then issued "a major plea" for free trade agreements with the USA and other countries. She will be working hard to achieve these this year, she said. Europe is to work with the USA to achieve high environmental and consumer protection standards.

Values orientation needed

Finally, Angela Merkel touched on the challenges relating to our fundamental values. There are no secrets any more today. Civil society wants to know exactly what politicians are doing and how countries are being governed. In Germany, we are happy to see this challenge. We should focus on the opportunities rather than the risks.

The 45th World Economic Forum is taking place in Davos from 21 to 24 January under the banner "The New Global Context". More than 2,500 leaders from the fields of business, politics and civil society, as well as from the academic and cultural communities are expected. The World Economic Forum is a non-profit foundation, and holds an annual meeting in Davos. The meeting provides a forum for the world’s leading economic experts, politicians, intellectuals and journalists to come together and discuss topical global issues.