* Merkel pledges to stand by auto sector
* Lower Saxony premier calls VW a "pearl of German industry"
* VW execs yet to face German parliamentary grilling
* Public vow to remain faithful to national motoring icon
By Caroline Copley
BERLIN, Oct 15 (Reuters) - As a diesel emissions scandal grips Volkswagen, German politicians and regulators have handled the nation's motoring icon with kid gloves in contrast to a crackdown by authorities in the United States.
In a bid to try and limit the damage to the cherished 'Made in Germany' brand, Chancellor Angela Merkel used a major speech last week to promise to stand by the auto sector, which provides one in seven German jobs.
Stephan Weil, premier of the state of Lower Saxony, where VW has its headquarters, spoke highly of the car maker on Tuesday, describing it as a "a pearl of German industry" and a company worth fighting for.
Meanwhile, German regulators have made only the briefest of statements on the scandal, preferring to focus on how to fix the problem vehicles.
It follows a pattern of relatively soft regulation in Germany.
While U.S., UK and EU regulators imposed billions of dollars in fines and settlements on banks in the wake of the financial crisis, including on Germany's largest lender Deutsche Bank, German financial watchdog Bafin has largely stood silent.
In the Volkswagen case, Bafin has opened a "routine probe" into the circumstances around the announcement of the emissions rigging.
This despite questions over why Volkswagen waited more than two weeks to go public with the cheating after formally acknowledging the deception during a conference call with U.S. regulators on Sept. 3.
In Germany, the responsibility for approving new vehicles falls to the KBA motor authority, which also checks that cars meet environmental standards. This contrasts with the United States, where emissions are regulated by the Environmental Protection Agency (EPA), a body at arms length from the motor industry.
On Thursday, the KBA said it had ordered Volkswagen to recall 2.4 million vehicles affected by the cheat software. But this action came over one week after the car maker submitted plans to the agency on how to fix the 11 million engines which had the cheat software installed.
KBA Spokesman Stephan Immen said the KBA had no precedent of imposing penalties on car manufacturers for wrongdoing. In contrast, the EPA has said VW could face fines of up to $18 billion.
Germany's light-touch approach contrasts with more aggressive action in the United States where the EPA's threat to refuse to approve VW's 2016 diesel models prompted the car maker to confess to cheating in diesel emissions tests.
Within days, the U.S. Department of Justice launched a criminal probe into the emissions rigging, while New York and other state attorneys general formed a group to investigate.
Last week, the U.S. Congress grilled Volkswagen's top U.S. executive, while the firm's UK boss was hauled before a committee of British lawmakers on Monday and Thursday.
But neither former Volkswagen Chief Executive Martin Winterkorn nor new boss Matthias Mueller have so far faced interrogation from lawmakers in Germany.
Prosecutors also waited almost three weeks to raid Volkswagen offices in Germany to secure documents and data devices in connection with the emissions rigging.
The scandal has caused outrage among consumers in the United States where VW faces a slew of lawsuits. But in Germany, the public reaction has been more subdued, with many reluctant to condemn a company often feted as a byword for the nation's engineering prowess.
Asked to list people or things that they think of in connection with Germany, 63 percent mentioned Volkswagen, according to the book 'How Germans Tick' published this year.
A survey last week from market research group Puls found 54 percent of people were still interested in buying a VW against 11 percent who would no longer do so and 35 percent who wanted to wait for the time being.
The U.S. crackdown on a beloved German brand has also stirred up anti-American sentiment, with some drivers seeing the tough U.S. response as a deliberate attempt to weaken Europe's biggest carmaker.
Suspicion of the United States is already widespread in Germany following reports of U.S. spying. On Saturday 250,000 people marched in Berlin against an EU-U.S. trade deal which they feel will erode European standards for food and safety.
"VW is a thorn in the side of the USA", Melanie Thurau wrote on Facebook. Another user Marek Misic posted on Oct. 3:
"VW, Audi, Skoda, Seat are and remain very good vehicles. The Yanks, with their rust buckets and gas guzzlers are just jealous of European car makers. Hasta la Vista baby, I'll be back and even better than ever before!" (Editing by Giles Elgood)