German finance minister Wolfgang Schäuble stepped up his calls for bondholders to assume a "fair" share of further Greek aid, setting Europe's biggest economy on a collision course with the European Central Bank.

In a speech to lawmakers in Berlin in which he evoked the spirit of German unity and European integration, Mr Schäuble appealed for backing for a second bailout for Greece to ensure a stable euro and bolster the global economy.

In return, "we have to insist on the participation of the private sector," he said.

"I have proposed a fair distribution of risks between tax payers and private creditors for the phase of gaining time," Mr Schäuble said in his speech to the lower house today. "We pointed out as early as last year that in the future mechanism for the solution of debt crises in euro states a participation of private creditors in cases of insolvency is indispensable."

The German finance minister is not backing down in the face of an escalating clash with ECB president Jean-Claude Trichet, who yesterday rejected any direct ECB participation in a second Greek bailout. Euro zone governments are scrambling to forge a plan by a June 24th EU summit to avert Greece becoming the currency area's first sovereign default.

Euro area finance ministers agreed on a conference call this week to establish a working group with the IMF, the ECB and the European Commission "to sound out the thin line between a meaningful involvement of the private sector and the avoidance of negative financial market reaction," Mr Schäuble said.

"We're taking sceptical voices and warnings from the European Central Bank on the involvement of the private sector seriously," he said. The working group is charged with "finding a good solution for the involvement of the private sector that can and has to be supported by the European Central Bank."

Bloomberg