Merkel won a fourth term in the September 24th vote but the far-right Alternative for Germany (AfD) poached one million votes from her conservative bloc, leaving her without an obvious coalition to lead Europe's largest
She has already said she would seek exploratory talks on forming an alliance between her CDU/CSU bloc and two smaller parties, the pro-business Free Democrats (FDP) and the ecologist Greens.
Merkel said in a speech in the eastern city of Dresden on Saturday that the negotiations would be “difficult”, but added: “I hope the coalition will fall into place.”
Such an alliance – which would be unprecedented in Germany at the national level – has been dubbed the “Jamaica coalition” because the colours of the three parties match the black, yellow and green of the Caribbean country's flag.
The talks could start in earnest in the next few days but the formation of the government is not expected before the end of the year.
On Sunday, Merkel and leaders of her Christian Democratic Union (CDU) are due to meet in Berlin with their Bavarian allies the Christian Social Union (CSU) to agree on a joint programme for the next four years.
The CDU/CSU bloc scored 33 percent in the September vote, its worst outcome since 1949, while the Social Democrats, her junior partners for eight years, were crushed with just over 20 percent and vowed to go into opposition.
“It is clear that in the near future, the Social Democrats of the SPD are not able to govern at the national level,” Merkel said.
However, the election marked a breakthrough for the anti-Islam AfD which won 12.6 percent, while the FDP won 10.7 percent and the Greens 8.9 percent.