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Armed police swept on the scene in Potsdam, Germany, after the suspected device was discovered by a local shop worker.

Bomb disposal officers have confirmed the package was found to be a viable device – tweeting “IED suspicion has been confirmed”.

Local media reports the device was mailed to a pharmacy close to the marketplace and a carousel popular with children.

Cops have now admitted they fear the device could be "one of many" and they have launched a major search.

It comes nearly a year to the day a ISIS-inspired terrorist ploughed a truck through a Christmas market in nearby Berlin.

Interior minister Karl-Heinz Schröter said there were nails found inside the package and confirmed police are hunting other devices.

"We are in the process of continuing our investigation ... It's possible that additional packages were delivered here in the vicinity of the Christmas market," Schroeter told reporters.

"We want to ensure that no one is any danger."

He contradicted earlier police reports, and added: "We just don't know at this point if this was a device that could have actually exploded or a fake or a test."

(Image: PH)

Police shut down the roads and completely cleared the Christmas market of revellers after the report.

The area was closed for more than three hours while specialist cops investigated the suspicious package.

Around 5.30pm local time officers announced they had discovered a viable device – which has reportedly been destroyed in a controlled explosion.

The package was reported to be 50 cm long and 40cm wide and containing wires and explosives.

(Image: PH)

Cops urged people to “avoid premature conclusions” about the incident in a post on Twitter – noting the investigation is “still ongoing”.

Responding to a journalist on Twitter, the German police said “what [the device] is exactly we cannot say”.

The bomb threat comes after ISIS called for Christmas attacks in the West – warning “soon on your holidays”.

(Image: GOOGLE)

The event brings back memories of the terror attack at a Berlin Christmas market in December last year when a Tunisian man ploughed into pedestrians.

Twelve people were killed in the massacre, which was later claimed by ISIS.

Germany’s security services estimate about 10,000 Islamic radicals are operating in the country and that 1,600 could be capable of carrying out an attack.

Last year, the US also warned of a heightened terrorist threat over the seasonal period – urging citizens to travel with caution.