Berlin  - Germany's economy will pick up in 2010 after a rough patch next year, Chancellor Angela Merkel predicted on Tuesday as she spoke to an audience of German business leaders.

"We'll face bad news in 2009, but we are going to do something so that 2010 will be better," said Merkel, who faces a general election next September. Merkel's cabinet was set to approve on Wednesday an anti-recession federal spending package.

She told the national employers' association she expected Germany's export-led economic growth to ultimately recover.

Her government would offer "bold, targeted and sustained measures" to boost the economy. She described them as a "bridging" measures so that businesses and citizens could survive the weak period.

Merkel said she had not given up her intention to ultimately balance the German federal budget.

If it had not been for the global financial crisis, this would have been possible in 2011. She said it was now her aim to achieve this in the life of the next parliament, which lasts until 2013.

The employers' national leader, Dieter Hundt, said some German industry sectors had suffered "dramatic" falls in demand already.

He appealed to German banks to resume supplying credit to industry and commerce at "reasonable" rates of interest.

Hundt welcomed government measures to help industry, but attacked the government for boosting federal spending. (dpa)