The semi-privatised German post office has warned that regulatory demands for cheaper stamps could lead to lower profits, post office closures and thousands of job cuts.

Deutsche Post said the loss in earnings would force it to reduce its costs.

To do so, it would cut up to 10,000 jobs, close post offices and raise prices for other products.

The warning came after Tuesday's announcement by the German postal regulator, RegTP, that it would ask Deutsche Post to cut postal prices.

The watchdog is expected to demand that the price of sending a letter or a post card is reduced by about 7%.

Deutsche Post said the regulatory changes could shave up to 1.5bn euros (�960m; $1.49bn) off its bottom line between 2003 and 2005.

"A profit drop in the billion euro range looks very ugly. That's very negative news for Deutsche Post," said one trader.

Falling stock

In the financial markets, traders said the news weighed heavily on the company's share price.

By the end of the day, the shares had lost 8.4%.

Deutsche Post's share price has been under pressure for months after the group said that this year it would probably fail to match last year's operating profits of 2.6bn euros.

The German government still owns 69% of the former postal monopoly.