Berlin promised to decide by the start of next week on whether to grant state aid to General Motors unit Opel, ending a year and a half of uncertainty over the European carmaker's future.

A steering committee due to assess the matter will meet on Friday, German Economy Minister Rainer Bruederle said on Tuesday.

The committee's meeting is one of several steps necessary before Bruederle can make a final decision on whether to give Opel the more than 1 billion euros ($1.2 billion) in state loan guarantees it has requested.

GM asked for aid from European governments to help fund a costly turnaround plan at Opel that would shrink production capacity by about 20 percent.

But the parent company's strong balance sheet and return to profitability from bankruptcy in just 12 months is undermining the arguments for state aid for its subsidiary.

Bruederle has said he is skeptical about whether Opel should receive aid, and recent delays in the decision-making process had raised suspicions that Berlin is purposely dragging its feet before ultimately turning Opel down.

The process was revived Monday as a panel of independent economic experts -- which advises Berlin on state aid to ailing firms -- made a recommendation on Opel aid, after having postponed a decision several times.

It was not immediately clear what the panel recommended. A statement is expected later Tuesday.

Bruederle only said the panel was very critical of Opel's request for aid.

German business daily Financial Times Deutschland earlier said, without citing sources, that the panel found no financial reasons to extend loan guarantees to Opel.

That means any decision in favor of aid would be based on political rather than financial factors, such as a desire to preserve good U.S.-German relations, the paper said.

Opel labor leader Klaus Franz said to his knowledge the article was speculative and wrong.

There was no negative recommendation, he said.

The advisers to the rescue fund are mainly former captains of German industry, such as ex-Schering CEO Hubertus Erlen and industry lobby group BDI's former head Michael Rogowski.

The steering committee that is due to meet Friday, meanwhile, includes state secretaries from government ministries and federal states that are home to Opel plants, as well as a representative of Chancellor Angela Merkel's office.

In a positive step for Opel's turnaround efforts, labor and management signed a restructuring deal Monday that aims to save 265 million euros in annual wage costs through 2014.

European union and workforce representatives from countries hosting Opel's major factories also signed the deal with Opel Chief Executive Nick Reilly.

(Reporting by Gernot Heller and Jan Schwartz; Writing by Marilyn Gerlach and Maria Sheahan in Frankfurt; Editing by Louise Heavens and Jon Loades-Carter)

($1=.8163 Euro)

Germany