(Reuters) - Germany's parliament will approve a fresh bailout for Greece on Friday in a vote seen as a test of Chancellor Angela Merkel's authority over her center-right coalition less than a year before federal elections.
The outcome of Friday's vote in the Bundestag lower house is not in doubt but Germans are deeply uneasy over the costs of the euro zone debt crisis and the number of coalition lawmakers voting against will be keenly watched.
The package of measures to be approved is aimed at reducing Greece's debt load to 124 percent of gross domestic product (GDP) by 2020. The government has acknowledged for the first time this week that the bailout will mean lost federal revenues.
Finance Minister Wolfgang Schaeuble, who will deliver the government's statement on the bailout in Friday's debate, said he was confident the package would pass comfortably and he defended Berlin's handling of the three-year-old debt crisis.
"We are trying to keep the costs and risks (of aid to Greece) as small as possible. We are just following the old rule of 'step by step'," he told a TV chat show late on Thursday.
Schaeuble said Germany was insisting on strict monitoring of Greece's reforms to ensure it met its fiscal targets but he also said the new conservative government in Athens was finally making headway in tackling the country's fiscal problems.
Echoing that view, Deputy Finance Minister Thomas Steffen told the economic council of Merkel's Christian Democratic Party (CDU) on Thursday evening: "The will for renewal exists (in Greece) ... I believe we have to give the Greeks another chance."
Others are less sanguine. All week, German newspapers have reverberated with predictions, including from some coalition lawmakers, that Germany and other euro zone countries will eventually have to write off some of their Greek debt holdings.
Jens Weidmann, head of Germany's central bank, said on Thursday the latest bailout did not mean the crisis was over.
"If Greece does not implement the agreed reforms and does not manage to put its budget on a solid footing, the effect of the new (aid) measures will evaporate," he said in a speech.
A minority of Merkel's lawmakers will vote against the package but criticism of the Greek bailouts within her coalition has softened in recent months after she decided the cost of expelling Greece from the euro zone would be far greater.
In a test vote on Wednesday, 15 of the 237 lawmakers in Merkel's own conservative bloc voted against the aid package and one abstained - though only about two thirds of lawmakers attended the meeting, participants said.
The Free Democrats, the CDU's junior coalition partner, expect about 10 of their 93 lawmakers to vote against or abstain, said a parliamentary source.
That means Merkel is heading for a bigger rebellion than in a Bundestag vote in July on a rescue package for Spanish banks, which saw 22 rebels from her centre-right coalition.
The opposition Social Democrats (SPD) and Greens have confirmed they will back the aid package.
They have accused the Merkel government of deceiving German voters about the true costs of the Greek bailouts but it is difficult for them to make political capital out of the issue as they are strongly pro-euro and support more EU integration.
"Basically they have no choice. If they behave in a way not supportive of the state, they will be berated as unpatriotic knaves," the head of the pollster Forsa, Manfred Guellner, told Spiegel online.
(Reporting by Gareth Jones; Editing by Sophie Hares)