A minister in Angela Merkel's conservative party propelled Germany into a debate about guarantees on bailout payments to Greece, backing a demand from Finland for collateral, but Berlin distanced itself from her comments.

Labour Minister Ursula von der Leyen, also a deputy president of the chancellor's Christian Democrats (CDU), told German TV on Tuesday that future bailouts should only be made against guarantees.

Several states are making big efforts to service their debt. This must be honored. But to keep up those efforts in the long term, collateral is needed, the minister was quoted as saying by public broadcaster ARD.

One official responded by saying her comments were not the German government's position and that the most important thing was to link aid under the European Financial Stability Facility to strict conditions regarding fiscal reforms.

Greece agreed last week to provide AAA-rated Finland with cash collateral for the loans in a plan that sparked requests for similar treatment from Austria, the Netherlands and Slovakia.

Until von der Leyen spoke, German government officials had only made off-the-record comments about Finland's requirement for Greece to put up collateral, saying they worried this could spark just such copy-cat requests from other countries.

Austria has been an outspoken critic of the bilateral deal and said on Tuesday it was one of many euro zone countries with concerns about unfair treatment.

The three latest countries to voice their demands and the Finns together account for around 11 percent of the euro zone contribution to the new 109 billion euro ($153.5 billion) Greek bailout.

RISKS FROM FINNISH DEAL

Many countries reject the solution that Finland negotiated for itself to the disadvantage of all others, Austria's Finance Minister Maria Fekter told reporters.

She said policymakers would have to work out a solution at the next meeting of European finance ministers in September.

Fekter said that there was broad consensus for expanding and extending the Greek aid package as agreed but that it had to be implemented in a fair fashion with all involved. Finnish Prime Minister Jyrki Katainen was quoted by Bloomberg news agency as saying he was open to changing the deal.

Von der Leyen has in the past been mentioned as a possible successor to Merkel, but was passed over by the chancellor in her selection of a candidate for president of Germany last year.

In her role as labor minister, von der Leyen has little direct say in euro zone policy, but she does sit on a new CDU committee that will debate euro zone policy ahead of the party's congress in November.

The CDU is hotly debating Merkel's leadership in the euro zone debt crisis, which has got poor reviews in recent opinion polls.

Some members of parliament from Merkel's center-right coalition, such as the conservatives' financial policy expert Klaus-Peter Flosbach, have also mentioned the option of Greece putting up gold reserves as collateral in media interviews.

Analysts say any new signs of discord in the euro zone could fuel market fears its political leaders are incapable of getting on top of the bloc's debt crisis.

Ratings agency Moody's said on Monday euro zone states seeking collateral for Greek aid should think again if they wanted to avoid driving the debt-mired state into default.

Moody's said it expected other euro area members to block the agreement with Finland, and Dutch Finance Minister Jan Kees de Jager said suggestions the bilateral deal was lawful were incorrect.

Greece, which clinched a new rescue package at a euro zone summit in July covering its borrowing needs up to mid-2014, is set to receive the next 8 billion euro tranche from its first bailout package in September.

Moody's said seeking collateral showed a lack of will in some euro zone countries and put more pressure on Germany and France to take stronger steps to support the euro project.

(Additional reporting by Michael Shields in Vienna and Annika Breidthardt in Berlin; writing by Stephen Brown; Editing by John Stonestreet)

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