Italian Prime Minister Silvio Berlusconi has caused uproar in the European Parliament by appearing to compare a heckling German MEP to a Nazi concentration camp guard.

Mr Berlusconi's outburst came after he had set out his plans for Italy's presidency of the European Union, which began on Tuesday.

Germany responded by describing the remarks as "unacceptable" and expressing its displeasure to the Italian ambassador in Berlin.

At a meeting of centre-right European People's Party MEPs, Mr Berlusconi apologised for any offence he might have caused the German people but refused to made a personal apology to the MEP, Social Democrat Martin Schulz.

The BBC's Patrick Bartlett says that, with his unscripted and controversial remark, the Italian leader has undone much of the goodwill he had built up in a polished speech.

There had earlier been protests by Green MEPs, who held up banners proclaiming "The law is equal for all" and "No godfather for Europe" at the start of his speech.

Only hours before, a court in the Italian city of Milan had suspended Mr Berlusconi's trial on charges of bribery under a controversial new immunity law.

Joke

Mr Berlusconi lashed out when Mr Schulz strongly criticised him for his tough policy on immigration.

"I know there is a man producing a film on the Nazi concentration camps," Mr Berlusconi said, "I shall put you forward for the role of Kapo (guard chosen from among the prisoners) - you'd be perfect."

Despite howls of protest, Mr Berlusconi refused to withdraw the remark, claiming it was a joke.

Mr Schulz said to applause from colleagues that he would not address the charge out of respect for the victims of fascism.

"But it is very hard for me to accept that a politician should be exercising the role of president of the European Council if he comes out with this kind of statement when he encounters the slightest contradiction," he added.

Criticism of Mr Berlusconi also came from within his own ruling coalition.

Italian TV quoted Deputy Prime Minister Gianfranco Fini as saying he was very annoyed by the tone Mr Berlusconi had used.

Investment

In his speech, Mr Berlusconi called on the EU to abandon "stagnation and fatigue", and to prove its clout on the world stage.

The Italian leader said he was very aware of the moral responsibility of overseeing work on drawing up a European constitution.

He spent much of his speech on foreign policy, stressing the need to turn the EU into a world power.

Reflecting Italy's own concerns about immigration, Mr Berlusconi said it was vital to reinforce dialogue with countries of the southern Mediterranean.

The EU's expansion into eastern Europe should be offset by stronger ties with the Islamic world, he said, adding that this was a key to world peace.

Mr Berlusconi went on to outline a controversial proposal to rapidly increase spending on the continent's infrastructure.

Italian Finance Minister Giulio Tremonti has called for investments of up to 70bn Euros in projects such as transport links, high technology developments and research.