Index: core/xwiki-velocity/src/main/java/org/xwiki/velocity/internal/DefaultVelocityConfiguration.java
===================================================================
--- core/xwiki-velocity/src/main/java/org/xwiki/velocity/internal/DefaultVelocityConfiguration.java	(revision 25234)
+++ core/xwiki-velocity/src/main/java/org/xwiki/velocity/internal/DefaultVelocityConfiguration.java	(working copy)
@@ -82,12 +82,17 @@
         this.defaultTools.setProperty("regextool", RegexTool.class.getName());
 
         // Default Velocity properties
-        this.defaultProperties.setProperty("resource.loader", "webapp");
+        this.defaultProperties.setProperty("resource.loader", "webapp, string");
         this.defaultProperties.setProperty("webapp.resource.loader.class", 
             "org.apache.velocity.tools.view.servlet.WebappLoader");
+        this.defaultProperties.setProperty("webapp.resource.loader.cache", Boolean.TRUE.toString());
+        this.defaultProperties.setProperty("string.resource.loader.class", 
+            "org.apache.velocity.runtime.resource.loader.StringResourceLoader");
+        this.defaultProperties.setProperty("string.resource.loader.cache", Boolean.TRUE.toString());
+        this.defaultProperties.setProperty("input.encoding", "UTF-8");
         this.defaultProperties.setProperty("velocimacro.messages.on", Boolean.FALSE.toString());
         this.defaultProperties.setProperty("resource.manager.logwhenfound", Boolean.FALSE.toString());
-        this.defaultProperties.setProperty("velocimacro.permissions.allow.inline.local.scope", "true");
+        this.defaultProperties.setProperty("velocimacro.permissions.allow.inline.local.scope", "false");
         // Prevents users from writing dangerous Velocity code like using Class.forName or Java threading APIs.
         this.defaultProperties.setProperty("runtime.introspector.uberspect", 
             "org.xwiki.velocity.introspection.ChainingUberspector");
Index: core/xwiki-velocity/src/main/java/org/xwiki/velocity/internal/DefaultVelocityEngine.java
===================================================================
--- core/xwiki-velocity/src/main/java/org/xwiki/velocity/internal/DefaultVelocityEngine.java	(revision 25234)
+++ core/xwiki-velocity/src/main/java/org/xwiki/velocity/internal/DefaultVelocityEngine.java	(working copy)
@@ -21,17 +21,20 @@
 package org.xwiki.velocity.internal;
 
 import java.io.Reader;
-import java.io.StringReader;
 import java.io.Writer;
 import java.util.Enumeration;
 import java.util.Properties;
 
+import org.apache.commons.lang.StringUtils;
+import org.apache.velocity.Template;
 import org.apache.velocity.context.Context;
 import org.apache.velocity.context.InternalContextAdapterImpl;
 import org.apache.velocity.runtime.RuntimeConstants;
 import org.apache.velocity.runtime.RuntimeServices;
 import org.apache.velocity.runtime.log.LogChute;
 import org.apache.velocity.runtime.parser.node.SimpleNode;
+import org.apache.velocity.runtime.resource.loader.StringResourceLoader;
+import org.apache.velocity.runtime.resource.util.StringResourceRepository;
 import org.xwiki.component.annotation.Component;
 import org.xwiki.component.annotation.InstantiationStrategy;
 import org.xwiki.component.annotation.Requirement;
@@ -101,7 +104,7 @@
         // it's used to load resources from the webapp directory in WebapLoader.
         String resourceLoader = 
             properties.getProperty(RESOURCE_LOADER, velocityProperties.getProperty(RESOURCE_LOADER));
-        if (resourceLoader.equals("webapp")) {
+        if (resourceLoader.contains("webapp")) {
             ApplicationContext context = this.container.getApplicationContext();
             if (context instanceof ServletApplicationContext) {
                 getEngine().setApplicationAttribute("javax.servlet.ServletContext",
@@ -153,7 +156,25 @@
     public boolean evaluate(Context context, Writer out, String templateName, String source)
         throws XWikiVelocityException
     {
-        return evaluate(context, out, templateName, new StringReader(source));
+    	if (StringUtils.isBlank(source)) {
+    		// nothing to write to the output
+    		return true;
+    	}
+    	
+    	try {
+	    	StringResourceRepository templateRepo = StringResourceLoader.getRepository();
+	    	if (templateRepo.getStringResource(source)==null) {
+	        	templateRepo.putStringResource(source, source);
+	    	}
+	        
+	        Template template = getEngine().getTemplate(source);
+	        template.merge(context, out);
+	        
+	        return true;
+
+    	} catch (Exception e) {
+	        throw new XWikiVelocityException("Failed to evaluate content with id [" + templateName + "]", e);
+	    }
     }
 
     /**