The NYTimes reports:
February 5, 2009
Vatican Demands Holocaust Denier Publicly Recant
By RACHEL DONADIO
ROME — Responding to global outrage, especially in Pope Benedict XVI’s native Germany, the Vatican for the first time on Wednesday called on a recently rehabilitated bishop to take back his statements denying the Holocaust.
Late last month, the pope revoked the excommunication of four schismatic bishops, including British-born Richard Williamson, who in an interview broadcast last month denied the existence of the Nazi gas chambers.
A statement issued on Wednesday by the Vatican Secretariat of State said that Bishop Williamson “must absolutely, unequivocally and publicly distance himself from his positions on the Shoah,” or Holocaust, which it said were “unknown to the Holy Father at the time he revoked the excommunication.”
The unsigned statement seemed a clear indication that the Vatican was facing an internal and external political crisis.
The day before, in a rare case of a head of state criticizing the pope, German Chancellor Angela Merkel called on the pope to clarify his position on the Holocaust, saying his previous remarks had not been “sufficient.”
On the reinstatement of the bishop see here. For the Vatican's subsequent statement, the one I'm guessing Merkel found insufficient, see here.