FRANKFURT (Reuters) - The German government and financial authorities are preparing a rescue plan for Deutsche Bank <DBKGn.DE> in case the lender would be unable to raise capital itself to pay for costly litigation, German weekly Die Zeit reported.

According to the draft plan, Deutsche Bank would be enabled to sell assets to other lenders at prices that would ease the strain on the lender and not put an additional burden on the bank, the paper said.

In an extreme emergency, the German government would even offer to take a direct stake of 25 percent, the paper added without saying where it got the information.

A Deutsche Bank spokesman referred to an interview Chief Executive John Cryan gave German daily Bild on Wednesday and denied the report.

"At no point did I ask the chancellor for support. Neither did I suggest anything like that," had told Cryan Bild in response to a different report that said he had asked German Chancellor Angela Merkel for her support with a $14 billion U.S. demand to settle claims it missold mortgage-backed securities.

Such a request would be "out of the question for us," Cryan said, adding that he could not understand how "anyone could claim that."

The German government is still hoping Deutsche Bank will not need state support and only scenarios for a potential rescue are being discussed so far, Die Zeit reported.

(Reporting by Arno Schuetze; Editing by Tina Bellon)