Finance Minister Wolfgang Schaeuble urged German lawmakers on Friday to approve the latest bailout for Greece despite their growing unease about the cost to taxpayers less than a year before federal elections.

Schaeuble praised the new Greek government's commitment to tough austerity measures but said speculation - including among German politicians - that Athens's international creditors will eventually have to write off debt could derail the reform drive.

The vote in the lower house Bundestag is seen as a test of Chancellor Angela Merkel's authority over her center-right coalition. A 'yes' vote is not in doubt but the number of coalition lawmakers voting against will be keenly watched.

Schaeuble said failure to approve the package, which aims to cut the Greek debt load to 124 percent of gross domestic product (GDP) by 2020, could spell disaster for Europe. He also tried to quash the talk of a debt writedown.

"If we say the debts will be written off (Greece's) willingness to make savings is correspondingly weakened. Such false speculation does not solve the problems," he said. "A Greek bankruptcy could lead to the break-up of the euro zone."

The government acknowledged for the first time this week that the bailout will mean lost federal revenues.

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.

Schaeuble said Germany was insisting on strict monitoring of Greece's reforms to ensure it met its fiscal targets, adding that the country's competitiveness was finally improving as a result of the austerity program.

REBELS

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 center-right coalition.

With the approach of next September's federal elections in Germany, the center-left opposition is also starting to show greater reluctance to support Merkel's European policies.

The Social Democrats (SPD) and Greens will back the aid package but the SPD's challenger for the chancellorship, Peer Steinbrueck, told German television on Friday: "We will vote for it because we don't want our reliability as European partners left in any doubt. It has nothing to do with the government."

He has accused Merkel's government of deceiving German voters about the true costs of the Greek bailouts but it is difficult for the SPD to make political capital out of the issue as they are strongly pro-euro and support more EU integration.

In Friday's Bundestag debate, SPD parliamentary leader Frank-Walter Steinmeier accused the government of putting off the "economically unavoidable" debt haircut for Greece for its own political reasons.

"You can postpone it until after Christmas, until after the Lower Saxony election, the Bavarian election or the federal elections, but it will come."

(Additional reporting by Stephen Brown; Editing by Janet McBride)