Tensions rise in Merkel's coalition over Opel rescue

* German deal to rescue Opel criticised by some

* Economy Minister opposed rescue, offered to resign

* Conservatives fear more handouts

By Erik Kirschbaum

BERLIN, May 31 (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.