Leading German institutes see inflation risk from ECB bond-buying

BERLIN, Oct 11 (Reuters) - The European Central Bank's (ECB) plans to buy bonds of struggling euro zone countries breaks the taboo of financing states and increases the danger of inflation, Germany's leading economic institutes said on Thursday.

"(The institutes) see the risk of a mid-term rise in inflation. This process could be triggered by the ECB effectively providing monetary financing for states," a consortium of institutes said in their twice-yearly report.

"The ECB's decision could shake the main pillar of the currency union, namely the goal of price stability. Due to these conditions the ECB is no longer independent of fiscal policy."

The institutes, whose analysis flows into the German government's own economic forecasts, also halved their growth expectations for next year on the back of the euro zone crisis.

(Reporting by Michelle Martin)

((MichelleHannah.Martin@thomsonreuters.com)(+49 30 2888 5223))