German stimulus measures could backfire: Bundesbank

RIGA, Oct 17 (AFP):  The German economy, currently slowing sharply, does not need additional stimulus and any such measures could backfire, the head of the central bank or Bundesbank, warned on Friday.

"With the economy operating at normal capacity utilisation, Germany is not in need of stimulus," Bundesbank president Jens Weidmann told a conference in Riga.

"On the contrary, in the face of coming demographic challenges, costly stimulus measures could even backfire via negative confidence effects," the Geman central bank chief, also a policymaker at the European Central Bank, argued.

Earlier this week, the German government was compelled to slash its growth forecasts for both this year and next year to take into account economic fallout from geopolitical crises such as Ukraine, weak eurozone growth and a slowing global economy.

The increasing gloom over Germany, traditionally Europe's growth engine, has cast a pall over the outlook for the entire single currency area and fears that the long-running euro area crisis could re-erupt.

In response, there are growing calls for Germany to loosen its public purse strings to kick-start growth.

But Weidmann insisted that the revised economic forecasts "still foresee growth in line with potential".

Weidmann was adamant that he was not dismissing increased investment in principle.