President Roman Herzog formally named Schroeder to the post, wishing him "the courage to tackle necessary changes" to keep Germany globally competitive.
The war widow's son took the oath of office before the lower house of parliament, the Bundestag, ushering in Germany's first center-left government in 16 years. His wife, Doris Schroeder-Koepf, watched from the public gallery as her husband pledged to defend the constitution, declining to end with the traditional formula "so help me God."
"The global economy is not in a satisfactory state, and it will cause us more problems in future," Schroeder said after receiving his letters of appointment from Herzog.
"But at the same time, we will have the courage to be decisive and carry out the reforms we have called for."
Earlier, the new parliament formally elected the 54-year-old by a vote of 351-287, with 27 abstentions. Schroeder smiled slowly, then stood to embrace Social Democratic party leader Oskar Lafontaine.
Kohl, whose conservative coalition was defeated last month in elections, walked up to Schroeder and shook his hand, then turned and walked away, showing no emotion.
The 68-year-old outgoing chancellor will sit in the new parliament as a back-bencher, having handed over the leadership of his Christian Democratic Union to his No. 2, Wolfgang Schaeuble.
Schroeder and his Social Democrats have sealed an alliance with the environmentalist Greens party to guide Germany through shifts in economic policy, the government's move to Berlin next year and the introduction of a common European currency Jan. 1.
With about 4 million Germans out of work, both parties have declared the fight against unemployment to be their No. 1 goal.
Schroeder has also agreed to work toward shutting down nuclear power plants and to raise energy taxes, though his pledges fall short of Greens party goals. Other plans include allowing more foreigners to become Germans, which is seen as a way to promote integration.
Schroeder's government holds a comfortable 21-seat majority in parliament.
Schroeder's business-friendly reputation helped him win "New Center" voters who previously mistrusted the left. But since his triumph in the Sept. 27 election, he has stressed plans to strengthen the social welfare state.
Schroeder has promised a "new beginning" after Kohl, Germany's longest-serving chancellor this century, whose Christian Democrats suffered a crushing defeat following 16 years in power.
Parliament has been rejuvenated: About a quarter of its 669 lawmakers are new and a record number 207 are women. Carsten Schneider, a 22-year-old Social Democrat, is parliament's youngest member ever.
Schroeder epresents a new generation of politicians who have little personal memory of World War II and feel at ease moving the seat of power back to Berlin -- despite the city's association with Nazi Germany and the Prussian military state.
Thierse, the first politician from former communist East Germany to chair parliament, said at Monday's inaugural session that the "Berlin Republic" stands for a modern, new country eight years after East Germany merged with the west.
"I view Berlin as an opportunity," he declared. "We can grasp it by opening ourselves to the pluralistic, diverse culture of this city."
Thierse also reminded Schroeder of one of his biggest challenges: Making easterners feel fully accepted in Germany and bringing the region's struggling economy up to western standards.
"This inner-German discourse isn't about to end for a long time," he said. "West Germans also must accept united Germany and its changes."
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