UPDATE 1-German central bank says Sarrazin hurting its image

* Bundesbank says board member Sarrazin damaging reputation

* German central bank distances itself from Sarrazin

* Sarrazin defends views at book presentation

(Updates with Bundesbank criticising Sarrazin in pars 1-5)

By Dave Graham

BERLIN, Aug 30 (Reuters) - Germany’s central bank publicly accused board member, Thilo Sarrazin, of damaging its reputation and warned of further action against him after comments he made about Jews and immigrants.

Sarrazin defended himself at a news conference on Monday in Berlin, denying he had used racial theory, and insisting his conclusions about the danger to Germany from Muslim immigrants were based not on ethnic differences but on cultural heritage.

The central banker, formerly finance minister of Berlin city state, also stood by statistics he said showed that Muslim immigrants were undermining German society.

The Bundesbank said in a statement after an extraordinary board meeting that his views did not reflect those of the central bank and that it wanted to talk to Sarrazin “without delay” and would decide on further steps “soon afterwards”.

“The Bundesbank board is of the view that Dr Sarrazin’s comments hurt the image of the Bundesbank,” the statement said.

Discrimination had no place at the central bank, it said.

Chancellor Angela Merkel condemned Sarrazin at the weekend, saying his remarks were “completely unacceptable”, and urged the central bank to act.

Sarrazin brushed off the criticism and said he was certain he had done nothing to warrant dismissal from the Bundesbank, which can only remove him for serious misconduct.

“I can’t imagine the chancellor has had the time to read my book,” said Sarrazin, referring to his 464-page work “Deutschland schafft sich ab”, (Germany does away with itself) which German media said was heading for the bestseller lists.

“It’s very balanced,” he said of the book, whose presentation was met by protests in Berlin on Monday.

According to excerpts in German media, the book says that Muslims cost the state more than they contribute, resist integration and may one day form a majority.

“I don’t want us to end up as strangers in our own land, not even on a regional basis,” Sarrazin writes.

Sarrazin, whose comments have won plaudits from far-right parties at home and abroad, caused further outrage when he said in a newspaper interview published on Sunday that Jews and Basques had genes that set them apart from others. [ID:nLDE67S0CO]

Asked about his gene comments, Sarrazin said he had been referring to recent findings published in the media, and said his book showed any bias he held towards Jews was positive.

Jewish leaders in Germany have strongly criticised Sarrazin, saying his remarks threaten to stigmatise Muslims in the same way the Nazis did the Jews.

“We need bridge builders in Germany, not hate preachers,” said prominent German Jewish lawyer Michel Friedman.

A number of senior government ministers have attacked Sarrazin for stirring up divisions in Germany, home to at least four million Muslims, the bulk of them of Turkish origin. It is also home to an estimated 280,000 Arabs.

The Bundesbank statement did not call for President Christian Wulff to dismiss Sarrazin dismissal, the toughest sanction available to the Bundesbank given strict laws aimed at protecting central bank independence, or urge him to resign. (Additional reporting by Krista Hughes in Frankfurt) (Editing by Louise Ireland)