Polarized Raman-scattering spectra of non-superconducting, single-crystalline FeTe are investigated as function of temperature. We have found a relation between the magnitude of ordered magnetic moments and the linewidth of A1g phonons at low temperatures. This relation is attributed to the intermediate spin state (S=1) and the orbital degeneracy of the Fe ions. Spin-phonon coupling constants have been estimated based on microscopic modeling using density-functional theory and analysis of the

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... cal spin density. Our observations show the importance of orbital degrees of freedom for the Fe-based superconductors with large ordered magnetic moments, while small magnetic moment of Fe ions in some iron pnictides reflects the low spin state of Fe ions in those systems.