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UPDATE 1-Merkel formally elected to third term by parliament vote

Tuesday, 17 Dec 2013 | 9:27 AM ET

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BERLIN, Dec 17 (Reuters) - Angela Merkel was elected to a third term as chancellor in a vote in the German lower house of parliament on Tuesday, paving the way for her new "grand coalition" government to formally take power.

The new left-right government faces a host of challenges, from bedding down European reforms aimed at shielding the bloc from future crises to seeing through Merkel's costly switch from nuclear to renewable energy.

Merkel, dressed in black and looking relaxed as lawmakers voted in the Bundestag chamber, joins fellow conservatives Konrad Adenauer and Helmut Kohl as the only post-war chancellors to have won three terms.

Her conservatives scored their best result in more than two decades in the election on Sept. 22 but were forced into lengthy coalition talks with the rival Social Democrats (SPD), whose members only approved the deal at the weekend.

The vote in the Bundestag was a formality as the ruling parties hold around four-fifths of the seats. A total of 462 lawmakers backed Merkel for chancellor, with 150 voting against and nine abstaining.

Later, members of her cabinet, six of whom are Social Democrats (SPD), were sworn in.

The biggest surprise in Merkel's cabinet was her choice of conservative Ursula von der Leyen as defence minister, which has fuelled speculation the spirited mother-of-seven could eventually succeed the chancellor.

President Joachim Gauck urged the government to act responsibly with its overwhelming parliamentary majority and said Germany should continue to build a "union of Europeans" which stood for peace and freedom.

Europe will indeed be top of the agenda in the first few days of Merkel's third term.

On Wednesday morning, she will address parliament on EU issues before heading to Paris for talks with French President Francois Hollande. She will then attend an EU summit in Brussels at which leaders must clinch a deal on the bloc's ambitious "banking union" project.

In the new year, Merkel's focus will shift back to domestic policies.

One priority for the "grand coalition" will be a reform of Germany's complex renewable energy law, blamed for soaring electricity costs. The government aims to have an agreement in place by Easter.

By the summer, reforms of the pension system - more generous payouts for mothers and exceptions to the 67-year retirement age - must be pushed through, and progress made on introducing a minimum wage of 8.50 euros per hour.

(Writing by Noah Barkin and Madeline Chambers; Editing by Alison Williams)