"We laid the ground for a common future for the European Union and overcame the impasse," Merkel told a plenary session of the European Parliament.

"At the end of the day we did not disappoint people's expectations and we avoided a division," she said. "Europe can once again look forward to a period of strength and confidence."

Merkel told the deputies that she anticipated difficult negotiations at the summit in Brussels, which saw Poland threatening to block the treaty in a dispute over voting rights.

If the talks had failed it would not have meant the end of Europe as we know it, she said, but it would have had major consequences which would have been difficult to predict.

Merkel said failure could have led to a two-speed Europe, with those in favor of reform pressing ahead at the expense of those who were reluctant to change.

The treaty, a key priority of the German presidency, meant the EU was able to preserve elements of the European constitution rejected by French and Dutch voters in referendums held in 2005.

Merkel said the post of a high representative for foreign affairs was necessary because it would enable Europe to speak with one voice as it grows more assertive on the world stage.

The new treaty has to be endorsed by an inter-government conference before it can be ratified and put in place in time for elections to the European Parliament in mid-2009.

The chancellor said she hoped these talks could get under way next month when Portugal takes over the rotating EU presidency from Germany.