So I did some more experiments. Forget what I said about transparency in my last post. The problem has nothing to do with it. It actually depends on the color! What I did was create a simple black box, which caused gridlines to appear. Then I created a simple white box, which also caused gridlines to appear. Then I created a simple grey box, which did NOT generate gridlines! Aha, the problem lies with images that only have pure white and/or pure black.
I gathered what I learned and added just a pixel of color on the bottom corner of the GermaniaE.png image, et voila! No more gridlines upon conversion! It's a crude workaround, but it works. You can always delete that pixel(now 4 pixels) later if you feel like it.