The German economy, Europe’s biggest, should post a record growth of 3.6 per cent this year followed by expansions of two per cent in 2011 and 1.5 per cent in 2012, the central bank forecast yesterday.

Support from strong exports is expected to boost internal demand as well, with a pick-up in household consumption providing yet another pillar of growth in what should be a “more broad-based” upswing, a Bundesbank statement said.

The forecast illustrates a growing split between robust activity in core eurozone countries and weak growth or recession in members on the periphery of the 16-nation bloc such as Greece, Ireland and Spain.

For 2010, the Bundesbank estimated that economic activity would expand by its fastest pace since German reunification in 1990.

The German economic recovery “will continue in the next two years following the impressive catching-up process in the current year,” an English-language statement said.

“Exports will remain the main driving force behind the upturn” and strong trade will also boost domestic demand, the bank forecast. Investments in capital goods and construction will benefit from low interest rates as well, while household consumption will be underpinned by a healthier labour market and higher wages, it added.

In 2012, the number of unemployed workers is expected to drop below three million, while the unemployment rate should fall from 7.5 per cent at present to 6.9 per cent, the forecast said.

Inflation was tipped to come in at 1.7 per cent next year and edge down to 1.6 per cent in 2012.

The growth estimates are slightly more conservative than those presented by the European Commission for Germany, which foresee growth of 3.7 per cent this year followed by 2.2 per cent and two per cent in the following two years.

In peripheral eurozone countries meanwhile, austerity budgets aimed at curbing excessive public deficits and reducing debt are expected to weigh heavily on the economy.

“There is a big unknown about all the consolidation measures, how they will affect the domestic economy, especially private consumption, in many countries,” UniCredit economist Alexander Koch said.

The European Union’s Eurostat statistics service has forecast a contraction of 4.2 per cent in Greece this year, followed by a further drop of three per cent in 2011.

In Ireland, which has just received a massive bail-out from the EU and International Monetary Fund, Eurostat sees a contraction of 0.2 per cent followed by growth of 0.9 per cent.

And in Spain, a much larger eurozone economy, the EU forecast is for a drop of 0.2 per cent this year and growth of 0.7 per cent in 2011.

The Bundesbank warned moreover that downside risks to its own forecast “originate from the persistent uncertainties in the financial markets due to the fragile position of public finances in a number of industrial countries.”

But Mr Koch noted that “in Germany for the time being, with dependable exports you clearly have a functioning business model.”