Merkel rivals signal tough bargaining on German coalition
* Social Democrats most likely partner for Merkel third term
* But SPD will ask high price for new "grand coalition"
* Coalition talks could last months, Greens purge leadership
* Finance minister says EU needs Germany to form coalition
BERLIN, Sept 25 (Reuters) - Angela Merkel's centre-left opponents took tough bargaining positions on Wednesday for the political poker game that follows her German election victory, with the Social Democrats and Greens feigning no interest in forming a coalition with her.
The conservative chancellor fell just short of an absolute majority on Sunday, meaning she has to form a government with one of three other parties who made it into parliament.
With one far-left party out of the question as a partner for her conservatives, that leaves only the Social Democrats (SPD) and Greens. Both began a negotiating process that could last months by swearing they would rather stay in opposition than help Merkel serve a third term.
The SPD remains the most likely partner for Merkel. Even after a second consecutive disastrous election, it is the biggest party after the conservatives and will ask a high price for repeating the "grand coalition" which Merkel led from 2005 to 2009.
Regional SPD leaders, who are influential in a system where power is divided between Berlin and the federal states, want to put any deal to a vote by more than 472,000 party members.
"At the end of such a process, our members must have the last word," said Nils Schmid, SPD leader in Baden-Wuerttemberg state, adding that his followers had "no interest in always saving Frau Merkel's bacon".
The SPD leadership meets on Friday to discuss strategies and the membership vote. Grassroots SPD supporters find the idea of being Merkel's junior partner again distasteful and it is far from certain whether members would back a grand coalition.
But given that Merkel's options other than a coalition are an unstable minority government or new elections, political scientist Hans Vorlaender said the likely outcome was "a more Social Democratic" country.
"The advantage is that it would ensure greater political stability and there would be no blockades by the (SPD-dominated) Bundesrat upper house," said the Dresden University professor.
The Greens are purging their leadership after an election that relegated them to smallest party in parliament.
Katrin Goering-Eckardt, one of the few Greens leaders left standing, said differences with the conservatives were too wide for the two parties to work effectively together in government.
"It would have no credibility and would not help a stable government, after the views expressed in this campaign," said Goering-Eckardt, who like Merkel is an east German close to the Lutheran Church, though she is 12 years younger at 47.
The party fielded her in the election as a centrist counterweight to left-leaning veteran Juergen Trittin, whose push for higher taxes on the rich seems to have hurt the party.
Right-wingers in the Merkel camp, such as Bavarian premier Horst Seehofer, find the Greens hard to stomach but even his objections are not set in concrete.
First ruling out any contact, he softened this to rejecting "Greens leaders who played a role in the election campaign" and appeared to leave a door open to the likes of Goering-Eckardt.
More significantly still, Finance Minister Wolfgang Schaeuble, second only to Merkel in his influence on their Christian Democrat party, said he could work with pragmatists like Winfried Kretschmann in Baden-Wuerttemberg, who is the Greens' first state premier.
Asked by Die Zeit weekly if the Greens were an option, Schaeuble said: "It depends which Greens we're talking about."
The 71-year-old, whom Merkel would be reluctant to sacrifice in the horse-trading over cabinet posts, urged fast negotiations "given some important European policy decisions we are faced with, for example on banking union".
Progress on pressing euro zone issues, including creating a banking union to restore confidence in the bloc's financial system, slowed in the months before the election as Merkel avoided agreeing anything that might upset German voters.
Asked if the price for a coalition might include concessions on SPD and Greens campaign promises of a minimum wage, higher taxes for top-earners and a wealth tax, Schaeuble kept his cards close to his chest, saying: "We have to see how the talks go."
But senior CDU parliamentarian Norbert Barthle appeared open to compromise, telling a regional paper he could imagine taxes for top earners rising to 45 percent from 42 percent - short of the 49 percent demanded by the SPD - in return for tax relief at the bottom end of the scale.
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