Berlin  - Two giant puppets walked the streets of Berlin in search of one another Saturday and finally embraced, watched by hundreds of thousands of astonished tourists and Germans, in a spectacle marking German Unity Day.

Elsewhere, Chancellor Angela Merkel said the fall of the Berlin Wall 20 years ago offered an example of the spirit needed today.

"We need a permanent sense of unrest like that in 1989," she said at the main national-day ceremonies in the south-western city of Saarbruecken, issuing a wake-up call against complacency.

Compagnie Royal de Luxe, a French theatrical company, was hired to put on the elaborate and eye-catching street performance, a fable about Germany's separation and reunification, in the capital Berlin.

Teams of puppeteers worked the limbs and blinking eyes of the figures of a young girl and her uncle looking for one another.

The girl puppet, 7 metres tall, began its tour in the former communist east of the city, while the uncle puppet, 15 metres tall and dressed as an old-fashioned deep-sea diver, began from the water of the Spree River which winds through the city.

Suspended from cranes, they hugged at Berlin's chief landmark, the Brandenburg Gate as a murmer of pleasure ran through the crowd.

The Berlin Wall, a concrete barrier with automatic shooting devices and searchlights built to stop people escaping from the communist system, used to run past the Gate.

The meeting symbolized the mingling of divided Germans when the Wall opened on November 9, 1989. Unity Day marks the Germans' legal reunification 11 months later on October 3, 1990, when communist East Germany ceased to exist and a single nation formed.

"I offer people dreams," explained the master of the giant marionettes, Jean Luc Courcoult, 55. "It's a story of the heart, but also a story about mankind." The puppets were set to go on a last stroll through the city on Sunday.

German unity has been smooth, with federal spending since 1990 lavished on superb roads, historic restorations and industrial estates on eastern Germany so it can catch up with the richer West.

But divisions remain, with the population still draining away from the East's smaller towns and rural areas where jobs are scarce. Last year the East had a net population loss of 136,500.

Germany's general election on September 27 stressed the continued strength of hard left political views, 29 per cent, among easterners.

"We have to put old squabbles behind us," said Merkel in a speech in Saarbruecken, appealing to Germans and their parties, churches and trade unions to work in partnership and not against one another.

She praised the thousands of East Germans who had risked persecution by the communists to demonstrate in 1989 for democracy.

"Unity did not happen out of the blue. It was the outcome of courage and resoluteness," said the chancellor, who grew up in the East. She said unity had come from the Germans' longing for liberty.

Germany Unity Day celebrations are held in a different state capital every year, with speeches and a street festival.

After threats which began two weeks ago by Islamists against Germany, armed police have kept a close eye on rail stations and airports. Watchful police fanned out through the street festival in Saarbrucken as well as the public festivities in Berlin.

Germans remain deeply grateful to the last Soviet leader, Mikhail Gorbachev, for allowing their nation to reunify in 1990.

He was one of the winners of government-funded Quadriga Prizes, which were being awarded in Berlin Saturday evening at the Foreign Ministry auditorium. European Commission President Jose Manuel Barroso and former Czech President Vaclav Havel were also honoured.

In a message of congratulation to Germany, Russia's President Dmitry Medvedev said Moscow and Berlin were on a path to "deepening their cooperation in many sectors" and that "partner relations" would continue under Merkel's next government.  dpa