Germany's Bundesbank has sent a poison pen letter to Berlin warning that only drastic measures can save Europe's largest economy from a crisis.

The bank used blunt language to criticise political procrastination and demand urgent reforms to return confidence to the economy in a 21-page report, "Ways out of the Crisis".

"The diverse range of problems must now be tackled in their entirety," said the Bundesbank report, adding that the economy needs a unified package of reforms to solve what it calls Germany's "mountain of problems".

Weak growth, the cost of reunification, terrorism, rising unemployment and an overburdened social welfare system are just some of the burdens on the economy, the Bundesbank said.

The release of the strongly-worded report seemed timed to embarrass the Chancellor, Mr Schroeder, into taking action. Next Friday, the German leader will deliver a "state of the nation" speech to the Bundestag which is expected to contain drastic proposals to rescue the economy. The Bundesbank warned that the government's preference for treating the symptoms rather than the cause of economic sickness, will no longer work.