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FILE PHOTO - Christian Democratic Union CDU party leader and German Chancellor Angela Merkel addresses a news conference at the CDU party headquarters, a day after the general election (Bundestagswahl) in Berlin, Germany September 25, 2017. REUTERS/Fabrizio Bensch(reuters_tickers)
MUNICH, Germany (Reuters) - Leaders of German Chancellor Angela Merkel's Christian Democratic Union (CDU) and its Bavarian sister party will meet on Oct. 8 to discuss a future coalition with other parties following Sunday's election, conservative sources said.
Months of uncertainty loom in Germany, Europe's biggest economy, after Merkel's conservatives won a fourth term in the election but bled support to the far-right Alternative for Germany (AfD).
Bavaria's Christian Social Union (CSU) has signalled it wants a rightward shift to focus on security and immigration curbs to dampen the appeal of the AfD to its voters.
This could complicate Merkel's hopes of building an already-awkward three-way coalition between her conservatives, the pro-business Free Democrats (FDP) and environmentalist Greens.
The Greens are firmly pro-immigration and Merkel herself has also resisted so far capping the number of migrants entering Germany.
Little movement on a coalition is expected before an Oct. 15 vote in the western state of Lower Saxony, currently ruled by the Social Democrats (SPD) - who have said they will go into opposition at a national level - and Greens.
The CDU/CSU bloc will aim at their meeting to agree common positions before any exploratory talks take place with the FDP and Greens, the conservative sources told Reuters.
Any indication of progress will be welcomed by investors.
With Merkel at the initial round of talks will be the head of her parliamentary party, Volker Kauder, and the head of the chancellor's office Peter Altmaier. CSU leader and Bavarian state premier Horst Seehofer will lead the CSU side.
Leading economic institutes said on Thursday that the next government can count on record budget surpluses over the next two years due to a solid upswing, potentially facilitating Merkel's task of building a coalition.
(Reporting by Joern Poltz; Writing by Madeline Chambers; Editing by Gareth Jones)