Tensions rise in Merkel's coalition over Opel rescue

By Erik Kirschbaum

BERLIN (Reuters) - A government-orchestrated rescue of struggling carmaker Opel has opened divisions in Chancellor Angela Merkel's conservative alliance only four months before Germany's federal election.

The 11th-hour deal to save Opel from the looming bankruptcy of U.S. parent General Motors was agreed in Merkel's chancellery in the early hours of Saturday after her grand coalition steamrolled the objections of her conservative Economy Minister.

Karl-Theodor zu Guttenberg, 37, offered to resign as Economy Minister after conservative ally Merkel and her cabinet ignored his opposition to a deal with Canadian auto parts group Magna, GM and the U.S. government to separate Opel and its 50,000 European workers from a GM bankruptcy filing expected on Monday.

Guttenberg's lonely resistance was applauded by his Bavarian Christian Social Union party (CSU) and the pro-business wing of Merkel's Christian Democrats (CDU) on Sunday. They fear support for Opel will only invite more companies to seek state handouts.

But the centre-left Social Democrats (SPD), who share power with Merkel's CDU/CSU in the grand coalition, pounced on the intransigence of Guttenberg, who in defiance of Merkel continued to tout his preference to let Opel rescue itself via insolvency.

"The threat is the state can be blackmailed if it is overly generous with help even once," a still unconvinced Guttenberg told the Welt am Sonntag newspaper on Sunday.

Michael Fuchs, head of the CDU business wing in parliament, cheered Guttenberg's rebellion and criticised the deal to help Opel with state-backed loans and loan guarantees worth 4.5 billion euros. Merkel, eager to avert mass job losses before the election, had made clear insolvency was not an option.

"With the Opel rescue we're throwing taxpayer money out the window with a sort of 'free-beer-for-everyone' mentality," Fuchs said. "It doesn't work. We must stop trying to save companies."