November 24, 2014 / 4:45 PM / 5 years ago

UPDATE 1-Weidmann warns of "legal limits" on further moves by ECB

* Bundesbank chief says further steps to lift economy ‘difficult’

* Weidmann says focus on growth, not bond buying (Adds background, detail)

By Sarah White

MADRID, Nov 24 (Reuters) - The head of Germany’s Bundesbank cautioned the European Central Bank on Monday about the legal hurdles it would face in embarking on money printing to buy government bonds, underlining its opposition to such a move.

The remarks from Jens Weidmann, who also sits on the ECB’s Governing Council, raise a further question mark over ECB President Mario Draghi’s ability to deliver after Draghi threw the door open for further measures to bolster the euro zone.

Draghi’s comments last week were interpreted by some as meaning that buying government bonds with new money, a policy known as quantitative easing, could come as soon as early 2015. But he faces stiff opposition from Germany.

“Instead of focusing on the purchasing programme, we should focus on how you find growth,” Weidmann told an audience in Madrid, when asked about the possibility of the ECB purchasing bonds issued by euro zone states.

He warned that it would be difficult to pursue such steps to lift low price inflation, a key yardstick of economic health.

“Of course there are other measures which are more difficult, because they are untested, because they are less clear ... and of course they hit the legal limits of what you can do,” said Weidmann.

“This is why discussions are so intense,” he added, having earlier highlighted “high legal hurdles” to any financing of states.

Weidmann’s comments came shortly after another senior ECB policymaker from neighbouring Austria played down prospects for any immediate buying of government bonds.

The central bank and many leading politicians in Germany, the bloc’s largest economy, fear that such a step would subsidise countries that are reluctant to reform.

Such opposition would make it difficult for Draghi to pursue the policy.

Europe’s top court has already heard a challenge from a group of Germans to the ECB’s first scheme to buy bonds to contain the euro zone debt crisis.

Announced in 2012, that plan was never used and has since been all but mothballed, but the ruling, due in the middle of next year, could have wide significance. An important signal will come on Jan. 14, when the court’s adviser, whose opinion it usually follows, issues his view.

If successful, even partly, the action would encourage other challenges that could hamper the ECB’s ability to act. (Reporting by Sarah White; Writing by John O’Donnell; Editing by Catherine Evans)

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