By Tristana Moore BBC News, Berlin

Mrs Merkel wants the US to accept binding CO2 emissions targets

German Chancellor Angela Merkel's reputation for calm, pragmatic leadership will be put to the test when she hosts the G8 summit this week in the Baltic resort of Heiligendamm.

Mrs Merkel has pushed one issue - climate change - to the top of the agenda. But can she clinch a deal?

The Bush administration has made it clear that it disagrees with the German government on climate change. While Berlin favours binding targets on reducing emissions of greenhouse gases, so far Washington has rejected the idea of firm commitments.

"Chancellor Merkel is an excellent mediator, both in domestic and international politics," said Florian Grotz, from the Free University in Berlin. "She carefully chooses her words and chooses the situations when she speaks out," he added.

Warmer US ties

Mrs Merkel has won praise from President George W Bush. Her Atlanticism is much appreciated in Washington, especially after tensions with her predecessor, Gerhard Schroeder.

German authorities are taking no chances with summit security

But Mrs Merkel has shown that she is no poodle, criticising the Bush administration over CIA renditions and the US detention centre at Guantanamo Bay.

Mr Bush was invited to Mrs Merkel's home constituency in the state of Mecklenburg-Vorpommern last summer and the two leaders hold regular telephone conversations. At last year's G8 summit in St Petersburg, Mr Bush took Mrs Merkel by surprise by giving her an impromptu back-rub - the pictures were beamed across the world.

"I listen to Angela Merkel. She has got a lot of wisdom," Mr Bush said in January.

The big question, though, is whether Mr Bush will listen to appeals to accept concrete steps to combat climate change, despite his admission of the threat posed by rising temperatures and calls for action by the world's biggest polluters.

Chancellor Merkel will have a private lunch with him at Heiligendamm, before the G8 summit starts in earnest. This will be a chance to press her case on global warming and convince other world leaders of the need for a new treaty under the auspices of the UN to replace the current phase of the Kyoto Protocol when it runs out in 2012.

Modest hopes

"Do not underestimate Chancellor Merkel," said Ulrike Guerot, a Senior Fellow at the German Marshall Fund.

Securing stable Russian gas supplies remains an EU priority

"She managed to reach an agreement on the EU budget, when everyone thought this would not be possible.

Mrs Merkel is preparing a consensus at the G8, and she can take advantage from the new momentum with a powerful French President, Nicolas Sarkozy, to provide a different direction in EU policy, towards the US and Russia on issues such as climate change and energy security," she said.

Mrs Merkel may benefit from the fact that expectations of a breakthrough at the G8 summit are very low. According to a recent survey, most Germans are not expecting any deal on climate change.

Mrs Merkel herself has sought to play down expectations, which is a strategy clearly aimed at strengthening her position. Any small achievement could be interpreted as a success.

Constitution dilemma

Chancellor Merkel has also adopted a high-risk strategy by attempting to revive the stalled EU constitutional treaty, despite resistance from sceptical countries, like Britain and Poland.

We have to find the soul of Europe Angela Merkel Q&A: EU constitution

With Germany's six-month presidency of the EU coming to an end, can she reach consensus among other EU members on a time frame, or "roadmap" for the EU constitutional treaty by the end of June?

Chancellor Merkel's best hope may rest with President Sarkozy, who has called for a slimmed-down EU treaty, which would be ratified by parliament, and not by voters. This would avoid a repetition of the situation in 2005, when Dutch and French voters rejected the EU constitution. "We have to find the soul of Europe," Chancellor Merkel said, or else face a "historic failure".

On Russia, Mrs Merkel has sought close ties with President Putin on energy security, but she has not shied away from expressing concerns over Russia's human rights record.

Economic upturn

At home, Mrs Merkel remains a popular leader, enjoying approval ratings of 70%, buoyed by the German economic recovery.

Germany is recovering from a prolonged economic malaise

With unemployment falling to a five year-low - below four million - and some economists predicting a growth rate of 2.8% this year, the rosy economic outlook is a positive development.

"Chancellor Merkel's coalition government has made an important contribution to the economic upswing by introducing investment programmes for energy-saving technologies, and measures to encourage small business investment," said Gustav Horn, director of the Macroeconomic Policy Institute. "The three-point rise in VAT in January has dampened economic growth, but it hasn't proved to be catastrophic," he said.

However, serious cracks have appeared within Mrs Merkel's coalition government. That is hardly surprising when you think that former ideological enemies, the conservative CDU/CSU party and the Social Democrat SPD, are now in the same government.

There have been bitter squabbles over reforms to healthcare and corporate tax, which have been played out in public and the coalition has often given the impression that it is close to collapse.

Chancellor Merkel has cut a good figure on her trips abroad, but many Germans are disappointed with the compromises which the coalition government has produced. Yet it was the German voters' ambivalence in the autumn of 2005 that led to the "grand coalition".

"Chancellor Merkel has managed to stand above the divisions in the coalition government, maybe that's the secret of her popularity," said Wolfgang Stock, author of Angela Merkel - a Political Biography.

Since Tony Blair's announcement that he is stepping down as UK prime minister, and Jacques Chirac's departure from the French presidency, Chancellor Merkel has emerged as "the most experienced and powerful political leader in Europe," according to Mr Stock.

Potential rivals

She can also count herself lucky that the Social Democrats are in disarray these days. SPD Chairman Kurt Beck is not regarded as a serious challenge to Chancellor Merkel.

Perhaps her biggest challenge may come from Foreign Minister Frank-Walter Steinmeier, a Social Democrat tipped as a future candidate for chancellor. Powerful CDU regional governors, like Roland Koch or Christian Wulff, continue to lurk in the background, joining the queue of potential successors.

In the past, Chancellor Merkel has proved her critics wrong. When she took her office, she was criticised for her dour image. Now she has a new hair style, and in a media-savvy world she has spruced up her image.

At news conferences, Mrs Merkel seems relaxed and in control of any tricky situation - she often smiles and even cracks a joke. However, she has given few interviews to the international media - so far she has tended to keep foreign journalists at arm's length.