BERLIN (Reuters) - Germany’s Central Council of Jews welcomed the Vatican’s decision to order a traditionalist bishop who denies the Holocaust to recant on Wednesday, saying it could lead to a resumption of ties with the Catholic Church.

Charlotte Knobloch, president of the Council of Jews, said the Vatican’s move was a positive signal and a reaction to German Chancellor Angela Merkel’s demand for clarification after Pope Benedict sparked outrage over his rehabilitation of the bishop.

“It is a first step which could lead to a resumption of dialogue with the Catholic Church,” said Knobloch in a statement which struck a conciliatory tone after she said last week she was breaking off ties with the Catholic church.

She had been angered by the German pope’s rehabilitation of Bishop Richard Williamson, who denies the extent of the Holocaust in which Nazis killed 6 million Jews, and that of three other members of the ultra-traditional Society of Saint Pius X (SSPX).

Knobloch also welcomed the Vatican’s statement earlier that SSPX must accept all the teachings of the Second Vatican Council, which urged respect for Judaism and other religions.

“That would mean the brotherhood would have to publicly retract their statements that Jewish citizens are murders of God, and to firmly condemn every form of Holocaust denial,” Knobloch said.