German Chancellor Angela Merkel poses for a selfie with 5-year-old Marie during the celebrations marking the 25th anniversary of the German Unification in Frankfurt.

Chancellor Angela Merkel said the emissions scandal that has hit car giant Volkswagen was “dramatic” but would not inflict lasting damage to Germany’s reputation.

In an interview with public station Deutschlandradio, Merkel stressed Volkswagen would now have to provide the “necessary transparency.”

“It is of course a dramatic event which is not good,” she said.

“But I think the reputation of German industry, the confidence in the German economy, is not so shaken that we are no longer considered a good place to do business.”

Volkswagen, a champion of German industry, has admitted that up to 11 million diesel vehicles worldwide have been fitted with the so-called defeat device.

The gadget detects when the car is undergoing testing and switches the engine to a low-emissions mode.

It then switches off this mode when the car is on the road. Under real conditions, the car spews out far higher emissions than is permitted.

The global scam has wiped more than 40 percent off Volkswagen’s market capitalization and led chief executive Martin Winterkorn to resign.

VW has vowed to get to the bottom of the scandal with an internal probe led by a team of US lawyers.

Meanwhile a newspaper report Sunday said that several engineers at Volkswagen admitted to installing defeat devices in the company’s cars.

Bild a.m. Sonntag said the employees told the internal investigation that they had been involved in the affair, which came to light last month.

“Several engineers stated that they installed the deception software in 2008,” the newspaper said.

Bild did not reveal their identities or say how many had made the admission. But it said their statements had so far failed to unmask those who masterminded the scam.

The engineers said the EA 189 engine, developed by VW in 2005, could not have complied with pollution caps and cost targets without the deception.

In another development, the head of the European Parliament told a group of German regional newspapers that the emissions scandal at Volkswagen (VW) would hit the German economy hard but Europe’s biggest carmaker was likely to survive the crisis.

Germany’s finance and economy ministers have played down the risk of a broader economic danger for Germany from the scandal.

“It’s a heavy blow for the German economy as a whole,” Martin Schulz, a German Social Democrat, was quoted as saying by the newspapers.

“It’s hard to believe what was done there negligently and possibly even with criminal energy. But I believe that Volkswagen is a strong company that has every chance of surviving the crisis,” he said.

VW has set aside 6.5 billion euros ($7.3 billion) to help cover the cost of the scandal, but some analysts think the final bill could be much higher. VW has said it will have to refit up to 11 million cars and vans containing illegal software.

The car industry is crucial for Germany, Europe’s largest economy, where the likes of BMW, Daimler and Volkswagen employ more than 750,000 people.

German newspaper Welt a.m. Sonntag cited Hans Dieter Poetsch, Volkswagen’s incoming chairman, as saying the scandal is a threat to the firm’s viability albeit a surmountable one.