Germany's Conservatives and Social Democrats (SPD) said on Wednesday they were optimistic about upcoming talks on forming a new government.
"Confidence has risen and we are making an optimistic start," the parties said in a joint statement after the party leaders of Chancellor Merkel's Christian Democrats and her Bavarian conservative allies met with their counterparts from the SPD.
Exploratory talks, a preliminary to full-blown coalition negotiations, are due to start this Sunday and continue for four days. The discussions will include Merkel's Bavarian ally, Horst Seehofer, whose CSU party has demanded a tougher line on immigration.
At a meeting on Wednesday afternoon, Merkel tried to build trust with SPD leader Martin Schulz and Seehofer by agreeing a structure for the talks.
"The CSU wants to form a government with the SPD and we will do everything in these talks to reach reasonable agreements," Seehofer told reporters. "This has to be sealed by Easter, but there's not much time left if you take a close look at the calendar."
Having failed to form a coalition with the Greens and the pro-business Free Democrats, Merkel is under pressure to repeat the "grand coalition" that has ruled Germany since 2013.
But the SPD and the CDU are at odds on issues ranging from healthcare to immigration and Europe, and are eager to win back voters after big losses in the last election.
The coming days could prove decisive for Merkel's future as chancellor.