* Chancellor's conservatives, Greens to meet again Tuesday
* Social Democrats still seen as most likely coalition ally
* Conservatives, Greens disagree on tax, wages, investment
German Chancellor Angela Merkel's victorious conservatives and the Greens party agreed on Thursday to hold further talks on forming a first-ever federal government between the long-time adversaries, party officials said.
Merkel's Christian Democrats (CDU) and their Bavarian sister party, the Christian Social Union (CSU), emerged as the dominant force in the Sept. 22 election but need a coalition partner. Full negotiations for a government could take up to two months.
The chances the CDU/CSU and Greens would move onto more formal coalition talks are not seen as high due to animosities between the arch-conservative CSU and the Greens, a left-leaning party with roots in the 1970s peace and anti-nuclear movements.
But some CDU and Greens leaders see a historic chance for both parties to explore new power options. The CDU/CSU's veteran partner, the Free Democrats (FDP), crashed out of parliament last month and the Greens' preferred ally, the Social Democrats, were beaten by the CDU/CSU for the third straight time.
The CDU/CSU first held exploratory talks with the SPD, who are still considered their most likely partner, and they will meet SPD leaders again on Monday. Further talks next week with the Greens will give Merkel more leverage with the SPD.
"It makes sense to meet again on Tuesday," Hermann Groehe, the general secretary of the CDU, said after the conservatives fell just short of an absolute majority in last month's elections with 311 of the 631 seats in the Bundestag.
"It was a good, open and constructive meeting."
The party leaders met for about three hours on Thursday. In 2005, the CDU/CSU and Greens held just one perfunctory 90-minute exploratory meeting that led nowhere. The CDU/CSU and SPD later formed a "grand coalition".
"It was a positive atmosphere, the mood was friendly and the talks were conducted with the necessary seriousness," said Greens co-chairman Cem Oezdemir, whose party won 63 seats on Sept. 22. The SPD won 193 seats and the radical Left 64.
GREENS EYE RETURN TO POWER
The Greens, the world's most successful pro-environment party after sharing power with the SPD in Europe's largest economy from 1998 to 2005, are eager to get back into government after helping legislate Germany's historic exit from nuclear energy despite their long and bitter rivalry with the CDU/CSU.
Despite a cultural divide between the CSU and the Greens, Merkel may be eager to keep the Greens option open to strengthen her hand in negotiations with the SPD.
The SPD has promised to give its 472,000 members the final word on whether to accept a "grand coalition" agreement.
The dominant CDU/CSU would also get more ministries and more of its policy aims into a coalition agreement with the smaller Greens party than it would in coalition with the SPD, which has three times as many parliamentary seats as the Greens.
Merkel may have to make compromises with the SPD or Greens on their demands for higher taxes on the rich, a minimum wage and infrastructure investment to rebalance Europe's biggest economy. She needs a government with broad enough public backing to tackle the euro zone's banking and debt problems.
Germany's European partners worry that drawn-out coalition talks could delay decisions on measures to fight the euro zone crisis such as an ambitious plan for a banking union.
The SPD is in no hurry to back Merkel again since it lost much popular support during the 2005-2009 grand coalition. Many grassroots supporters fear Germany's oldest party would lose even more identity under the popular chancellor.
The CDU/CSU and Greens disagree on taxation, wages and investment. While the Greens campaigned for higher taxes on the rich, the conservatives ruled out increasing any taxes. The Greens, like the SPD, are in favour of a minimum wage.
The Greens want to focus on core issues such as renewable energy and CO2 emissions. They criticised the government over the migrant boat disaster off the Italian island of Lampedusa, saying Germany needs to do more to prevent such tragedies.