A full-scale restructuring of Greek debt would have "completely uncontrollable" effects on financial markets and could threaten other countries' stability, German Chancellor Angela Merkel warned on Wednesday.

Merkel's comments confirm her softened stance on the role of the private sector in a new Greek rescue package. Not until last week did she rule out anything other than a voluntary participation by private creditors.

Imposing a so-called haircut on Greek debt — reducing the amount to be repaid — would endanger not only banks and other creditors who hold Greek bonds, but also institutions that sold insurance policies against a default, Merkel said.

Those credit default swaps have a "significantly higher" face value than the debt itself, and the consequences of them being called on can't be foreseen, she said.

"Nobody around the globe knows exactly who holds those papers and what it means if they come due," Merkel told a meeting of the German parliament's European affairs committee.

She added it was also unclear "who will have to pay how much and who will need fresh capital in what way."

The chancellor added that the CDS contracts — derivatives that also played a central role during the financial crisis following the collapse of the U.S. investment bank Lehman Brothers — are currently not regulated, but "must be made transparent" amid efforts to tighten financial regulation.

A full-scale debt restructuring also could prove contagious, leading investors to question the stability of other European nations that otherwise would not need assistance from the EU to meet their financing needs, she said.

The chancellor wants to get private creditors to contribute to the next aid package for Greece on a purely voluntary basis, an initiative for which Merkel doesn't yet have a majority among the leaders of the 27 European Union nations holding a summit in Brussels on Thursday and Friday.

However, Merkel voiced confidence that other EU leaders would follow Germany, France and the Netherlands in supporting the idea.

It remains unclear how much money might be contributed by private creditors, but Merkel insisted it must be "substantial ... and measurable."

The EU summit comes after Greek Prime Minister George Papandreou survived a vote of no-confidence early Wednesday, paving the way for the adoption of a new package of austerity measures next week.

Merkel said she had congratulated Papandreou on winning the confidence vote in a telephone conversation Wednesday morning. However, as she briefed lawmakers in Berlin, she left no doubt that further assistance for Greece would only be considered if the Greek government delivers on its pledges.

Adopting the new set of austerity measures "is the required precondition to discuss the question of a new program," she insisted.

As borrowing costs for Greece remain prohibitive, Athens cannot return to bond markets as foreseen under last year's euro110 billion loan package by the EU, the ECB and the International Monetary Fund, requiring a new bailout to meet its financing needs.

The new program — likely to figure high on the EU summit's agenda — is expected to be of a similar amount to last year's aid package and is meant to secure Greece's financing needs through 2014.