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UPDATE 1-Germany's Merkel has warned against demonising diesel, spokeswoman says

says@ (Adds German government spokeswoman and details)

BERLIN, July 26 (Reuters) - German Chancellor Angela Merkel has repeatedly warned against "demonising" diesel engines, a German government spokeswoman said on Wednesday after Britain announced a plan to ban combustion-powered cars by 2040.

Britain said it would ban the sale of new petrol and diesel cars from 2040 as part of a plan to get them off the roads altogether 10 years later, but officials in Berlin suggested Europe's largest economy would not follow suit.

"The chancellor has often warned against demonising diesel motors - diesel motors emit less CO2 and are therefore more environmentally-friendly but of course we need to work honestly and of course we continue to look for other solutions," German government spokeswoman Ulrike Demmer told reporters

She added Merkel was, however, also promoting electric cars.

A Transport Ministry spokesman said that in view of existing commitments to achieve a carbon neutral economy by 2050, focusing exclusively on a target date for phasing out combustion engines would be "unimaginative".

But others are in favour of Germany taking action more rapidly, with a member of Merkel's Christian Democrats (CDU) saying the country should start phasing out petrol and diesel soon.

"We need to start getting rid of combustion technology in the short-term," Oliver Wittke, a transport expert in Merkel's CDU, told Deutschlandfunk radio.

He said it was unacceptable to let Britain lead the way while Germany, the home of major carmakers such as Volkswagen, Daimler and BMW, was lagging behind.

He said Germany should, if possible, reach a binding agreement with its European partners on this, adding the right time to phase out the combustion engine had yet to be clarified.

Germany's car industry is in hot water after Der Spiegel reported on Friday that Volkswagen <VOWGtp.DE >, BMW, Audi and Porsche may have colluded to fix the prices of diesel emissions treatment systems.

EU antitrust regulators are investigating allegations of a cartel. The supervisory boards of Daimler and Volkswagen are due to meet on Wednesday to discuss the issue.

Herbert Behrens, a transport expert in the radical Left party, also said the government should start taking action now so it could cope without fossil fuels by 2050.

"Today we can start setting out political guidelines and the framework so the automobile industry and employees know what's in store for us," he said, adding there was insufficient investment in electric cars. (Reporting by Michelle Martin; Editing by Alison Williams and Mark Potter)