BERLIN (MNI) - German Chancellor Angela Merkel, in a television interview broadcast Sunday, dismissed media reports that Germany will instruct the state-owned development bank KfW to buy Greek bonds.

Asked about media reports that the German government might aid Greece via KfW bank, Merkel responded dismissively. "The question is always being asked whether states will become active [in aiding Greece]," she said. "And once again I point to the existing situation regarding the [EU] treaties."

If any German bank were to buy significant volumes of new Greek debt, government-controlled KfW would appear to be the most likely one to do so. Private German banks, as well as regionally-managed state banks, are unlikely to increase their exposure to Greece, banking sources told Market News International.

KfW declined to comment on the reports while the Finance Ministry pointed only to the Chancellor's official position.

Greece will have to raise around E54 billion this year. In March and April alone, some E22 billion worth of outstanding debt is due to mature and must be refinanced. Fears that new Greek bond issues could be under-subscribed have once again ignited speculation about a potential bailout for Greece.

The response from German banks suggest that the Greek government may indeed have difficulties tapping the markets.

A number of large Germans banks confirmed that they currently have no intention of increasing their exposure to Greek bonds.

Postbank, which holds about E1.3 billion worth of Greek debt said it "has no plans to increase its exposure." This "would not be in line with our risk-strategy," a bank spokesperson said.

Eurohypo also told MNI that it has no plans to raise its E3.1 billion stake even if the German government were to issue guarantees. "We have no intention of changing our position," a spokesman said.

A Deutsche Bank spokesman said that buying government bonds for its own account is "not part of the Deutsche Bank's business model." But the bank is still interested in advising on Greece's capital market transactions, he said.

Deutsche Bank's CEO Josef Ackermann was in Athens last Friday meeting with Greek government officials. The bank's spokesman said Ackermann was there to advise the Greek government on issuance of a 10-year bond. The bank had advised Athens in January in preparation for the issuance of a 5-year bond.

Germany's state-owned Landesbanken, some of which received significant government aid during the financial crisis, also voiced reservations about taking on more Greek debt. Sources close to the matter suggest that these banks may even cut their exposure to Greek bonds as they reduce their balance sheets in line with EU Commission conditions.

New purchases of Greek sovereign securities are not being considered at the German bank West LB either, given the bank's obligation to cut its balance sheet and its classification of existing Greek debt as "non-strategic," sources close to the bank said.

The bank "has classified" its holdings in Greek government securities as "non-strategic" and "to a large extent has divested them into its newly-formed clearing institute" under the auspices of the German Financial Market Stabilization Fund (Soffin), the sources explained.

Therefore, "new engagements would indeed not come into [play] because the bank must slash its balance sheet in the course of implementing the European Commission's conditions [as a result of the bank's receiving public aid money]," the sources elaborated.

Sources close to other Landesbanken confirmed that they are in a similar position to West LB.

While German banks expressed reservations about new purchases, Merkel also declined to make a commitment for help from Germany's government.

The focus is on Greece implementing its budget consolidation measures, Merkel said. "I hope that then we'll get the confidence of markets in the Greek efforts -- and in that, we really want to support Greece."