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FILE PHOTO: German Chancellor Angela Merkel speaks to Finance Minister Wolfgang Schaeuble Sigmar Gabriel during a session of the German lower house of parliament, the Bundestag, in Berlin, Germany, October 15, 2015. REUTERS/Hannibal Hanschke/File Photo


BERLIN (Reuters) - Outgoing German Finance Minister Wolfgang Schaeuble said he is confident his conservatives can work out a new three-way coalition government.

Chancellor Angela Merkel won a fourth term in office in a Sept. 24 election, but a fractured vote that saw the far right enter parliament means she is trying to work out a three-way coalition that is untested at federal level.

The Bavarian sister party of Merkel's Christian Democratic Union (CDU) is shaping up as an obstacle to her efforts to forge the tie-up between their conservative bloc, the environmentalist Greens, and the pro-business Free Democrats (FDP).

Schaeuble said the parties would work out a deal.

"I advise calm. A way will be found," he told a special edition of the Bild am Sonntag newspaper published on Tuesday, the anniversary of German reunification.

Leaders of Bavaria's Christian Social Union (CSU) - stung by a drop in support of more than 10 percent in the election - want the conservative bloc to agree policies on immigration, pensions and healthcare before opening coalition negotiations with the other two parties.

Merkel has rejected a CSU demand for 200,000 per year cap on immigration, complicating her efforts to form a new government.

(Writing by Paul Carrel; Editing by Alison Williams)

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