Merkel's conservative CDU/CSU bloc, which won the September vote without obtaining a clear majority, launched exploratory talks with the liberal and pro-business Free Democrats (FDP), followed by a meeting with the left-leaning and environmentalist Greens.
To avoid a breakdown that would force new elections, all sides will have to agree in the coming weeks on tough compromises on thorny topics ranging from immigration to EU reform to climate policy.
The CDU's general secretary, Peter Tauber, was cautiously optimistic after the separate discussions with the FDP and the Greens, telling reporters they had been “good talks”.
It sends “a strong signal” when such disparate parties were showing a willingness to listen to each other and overcome their differences, he said.
“But we still have a good way to go,” he added.
The Greens' political director, Michael Kellner, described the discussions with the conservatives as “constructive talks” focussed on finding solutions.
“But what's also clear is that we still have a long road ahead,” he added.
The Greens and the FDP will hold their own talks on Thursday.
All sides are then set to meet jointly on Friday to open negotiations that could form a government by January in the EU's top economy.
The alliance, which would be a first for Germany at the national level, has been dubbed “Jamaica” because the parties' black, yellow and green colours match those of the Caribbean country's flag.
“Jamaica and Germany are 8,500 kilometres apart,” the FDP's secretary general Nicola Beer told reporters. “I think today the first few metres of that journey have gone well.”
Merkel ally resigns
The delicate negotiations come as Merkel, long seen as Europe's most influential leader, is increasingly described as a lame duck after her party slumped to its worst result since 1949 in last month's general election.
“If the CDU had any kind of challenger waiting in the wings, Merkel would have reason to worry,” the Sueddeutsche Zeitung daily wrote.
In the latest fallout from the vote, the CDU's state premier in Saxony, Stanislaw Tillich, on Wednesday unexpectedly announced he was stepping down to make way for a younger generation.
The move comes after his party was narrowly beaten in the eastern state by the far-right, anti-Islam Alternative for Germany (AfD).
Tillich, 58, said Saxony faced “great societal challenges” that required “a new and fresh energy”.
If trouble is brewing in Merkel's party, her more conservative Bavarian allies, the CSU, are in disarray, fearing another poll drubbing in state elections next year.
Having long railed against Merkel's decision to allow in more than a million asylum seekers since 2015, the CSU has signalled a sharp shift to the right to win back voters from the anti-immigration AfD.
Horst Seehofer, head of Merkel's Bavarian sister party, the CSU, reiterated Wednesday that limiting immigration was a “very, very important” goal.
The CSU's negotiator Alexander Dobrindt said earlier that Sunday's election victory in Austria of rightwing candidate Sebastian Kurz showed that the CDU/CSU must “position ourselves as a conservative force in these negotiations”.
Such talk only heightens distrust with the Greens, who favour a multicultural society that welcomes refugees.
Greens negotiator Jürgen Trittin pointed to growing rightwing and populist tendencies in the CDU/CSU bloc and warned that their hardline demands on the refugee issue would present “massive hurdles”.