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Germany sets limits on Opel aid before Merkel visit

Germany's economy minister said that there were a host of investors interested in troubled carmaker Opel, but warned they could not expect Berlin to assume all the financial risks linked to the company.

Ahead of a Tuesday visit by Chancellor Angela Merkel to Opel's headquarters in Ruesselsheim, Economy Minister Karl-Theodor zu Guttenberg tempered hopes that the government would stick out its own neck to save the company.

Opel, a unit of struggling US carmaker General Motors, employs about 25,000 people in Germany and has said it needs €3.3 billion in state aid from European governments to save jobs and keep plants open.

“There are a whole host (of interested parties). These include serious companies,” Guttenberg told the Welt am Sonntag newspaper.

But he added: “One thing is sure: the wish of some interested parties that the government take on the full risk of their investments over a period of many years is simply unacceptable.”

There have been no serious public declarations of interest in Opel since its problems first came to light last year and carmakers like Daimler and PSA Peugeot-Citroen have made clear they do not want to buy the company.

GM Europe submitted a rescue plan for Opel last month under which Opel and Vauxhall would be partly spun off into a new subsidiary, but the German government has said the company's concept is inadequate and demanded more details.

Merkel, who faces an election in September, is under pressure to help Opel, which traces its roots back to the 19th century and became a symbol of the country's post-war recovery.

But she has said that if the state were to act, it would more likely be in the form of loan guarantees rather than a direct stake in the company.

Ahead of her Tuesday visit, labor unions warned of the consequences if Berlin fails to help.

Armin Schild, a union representative on the company's supervisory board, told the Berliner Zeitung daily that a collapse of Opel could cost a total of 400,000 jobs, around half at the firm's suppliers.

Detlef Wetzel, deputy chairman of powerful German engineering union IG Metall, said the state should be willing to consider a stake in Opel.

“I think in this case it would make sense if the government took a stake in Opel for a few years if an investor cannot be found now,” he told Frankfurter Allgemeine Sonntagszeitung.

Merkel faces pressure from the conservative wing of her party not to intervene given that Berlin has already provided billions of euros to help banks like Commerzbank and Hypo Real Estate.

German Vice-Chancellor and Foreign Minister Frank-Walter Steinmeier, a center-left Social Democrat (SPD) who will be running against Merkel in a September election, said the government should not rule out any measures. (Reuters)