Bundesbank economic confidence

Germany's central bank said it expected the domestic economy to pick up markedly in the second quarter and insisted the improvement could be strong enough to boost the struggling 17-member eurozone as a whole.

The Bundesbank stated construction activity would catch up in the months ahead, adding there was also reason to hope that companies would start investing more in machinery and equipment to meet increased demand for goods and called it a key stage in any recovery.

But the bank also warned that there was no end in sight yet to troubles, with too much government debt in many other euro area nations that were Germany's major trading partners.

At loggerheads with Brussels

Releasing its latest monthly report, the central bank urged Berlin to be adamant in consolidating the national budget against the backdrop of favorable conditions. "The positive frame conditions reflected in low unemployment figures and low interest rates should provide a good opportunity to bring down debt levels," it said in a statement.

At the same time, the Bundesbank criticized a plan by the European Commission to give some eurozone nations more time to push their public deficits below the bloc's limit of 3 percent of gross national product (GDP).

The EU executive had recently decided to give France two more years to do just that. Germany's central bank feared that period of grace could have an impact on indebted nations' resolve to push through required structural reforms quickly.

hg/rc (Reuters, dpa, AP)