Give Greece more time, says Germany's Steinbrueck

Former German Finance Minister and Social Democrat (SPD) member Peer Steinbrueck addresses a speech during a North Rhine-Westphalia SPD party convention in the western German city of Muenster September 29, 2012.

BERLIN (Reuters) - Greece should be given more time to reform its economy and must not be thrown out of the euro zone, said Peer Steinbrueck, the man hoping to oust Angela Merkel as Germany's chancellor next year.

Steinbrueck, named by the main opposition Social Democrats on Friday as their candidate to challenge the conservative Merkel, told Die Welt am Sonntag newspaper that Germany should be ready to provide aid to Greece for some time to come.

"In the case of Greece, we cannot tighten the screws any further. The Greeks must stand by their commitments, but we must also give them more time," said Steinbrueck, who served as finance minister in a coalition led by Merkel in 2005-09.

"And the chancellor must finally tell the German people the truth: Greece will not be able to borrow money on the capital markets in the coming seven or eight years. We will have to help it until then," he added.

Greece, now in its fifth year of recession and kept afloat only by international loans, was supposed to return to international capital markets after its second bailout program ends, but many economists now say it will need a third bailout.

Steinbrueck said that the SPD's support in parliament for a third bailout for Greece would depend on the conditions attached.

Merkel's center-right coalition hopes to avoid asking the German parliament for further aid for Greece but is awaiting a detailed report of that country's economic situation being prepared by its international lenders.

Steinbrueck ruled out a Greek exit from the euro zone.

"The political and economic reverberations would be devastating," he said.

Merkel and senior ministers in her coalition have criticized Athens sharply over its failure to implement tough structural reforms since the crisis began three years ago but have recently said they want Greece to remain in the euro zone.

(Reporting by Gareth Jones; Editing by David Goodman)