By Annika Breidthardt
BERLIN (Reuters) - Angela Merkel's conservatives appeared headed towards coalition talks with their main center-left rivals on Tuesday after heavyweights from the German chancellor's camp ruled out a marriage with the environmentalist Greens.
Merkel's center-right Christian Democrats (CDU) and their Bavarian sister party, the Christian Social Union (CSU), notched up their best result in more than two decades in a Sunday's election, but finished five seats short of an absolute majority.
The Social Democrats (SPD) look most likely to team up with Merkel after her current coalition partner, the market-friendly Free Democrats (FDP), failed to clear the 5 percent threshold to enter parliament. The only other parties in the new Bundestag, or lower house, will be the Greens and the hardline Left.
"I won't hold such talks (with the Greens). End of story," said Horst Seehofer, leader of the CSU, which won landslide victories in both Bavaria's state election on September 15 and in Sunday's national poll.
"I can only say flirting with the Greens ... would immediately strengthen the right wing," he told the magazine Der Spiegel.
He was alluding to conservative fears that a leftward shift by the CDU-CSU could encourage more voters to switch to more right-wing parties such as the anti-euro Alternative for Germany (AfD), which narrowly failed to win seats on Sunday.
Merkel said on Monday she had already made contact with the SPD leadership, but did not rule out talks with other parties in the search for a stable government to steer Europe's largest economy through the next four years.
The more conservative wing of Merkel's bloc dislike the pacifist Greens, who favor big tax increases for the wealthy.
The CDU-CSU ruled with the SPD in a fairly effective 'grand coalition' led by Merkel from 2005 to 2009.
"The SPD is simply the bigger parliamentary group, so our first offer (of coalition talks) is to them. Given the campaign statements, that's the right preference for me in terms of content too," senior CDU lawmaker Volker Kauder said.
Having suffered its second-worst post-war election result, the SPD is divided over whether to govern again with Merkel, with some saying the party should stay in opposition and focus on returning to power in 2017.
If it agrees to join a Merkel-led government, the SPD is likely to push for big concessions such as a national legal minimum wage and higher taxes on the rich. It may also insist on getting the finance ministry - replacing respected incumbent Wolfgang Schaeuble - and others such as the foreign and labor ministries.
SPD leaders will meet on Friday to discuss their options, but Kauder urged them not to drag their feet.
"Europe cannot wait for the formation of a government in Germany. We must be able to act," he said.
Almost two-thirds of Germans would like another CDU-SPD coalition, a poll indicated on Tuesday. So would some of Germany's euro zone partners, who hope the SPD can soften Merkel's focus on austerity in tackling the currency bloc's debt crisis.
Schaeuble played down such expectations in an interview published on Tuesday.
"We have held our ground in our euro policies. This must remain in the interests of Germany and of our future," he told the Leipziger Volkszeitung newspaper.
The head of the European Parliament, German Social Democrat Martin Schulz, said he hoped the new government would implement an "intelligent" investment program to complement Berlin's insistence on fiscal rectitude.
(Reporting by Annika Breidthardt; editing by Gareth Jones and Kevin Liffey)