Germany’s conservatives and their main leftist rivals have announced they plan to hold a third round of talks later this week on forming a coalition government.
It followed eight hours of discussions between Chancellor Angela Merkel’s Christian Democrats (CDU) and the Social Democrats (SPD).
The CDU fell just short of an outright majority at last month’s polls.
Mrs Merkel is expected to announce a coalition partner within days.
She is due to meet the Green Party for a second round of exploratory talks on Tuesday.
But correspondents say the SPD is seen as the likeliest new partner, despite sharp differences.
Also taking part in the talks are members of Mrs Merkel’s Bavarian allies, the Christian Social Union (CSU).
The next round of preliminary negotiations with the SPD could take place on Thursday but this depends on the outcome of the discussions with the Green Party, CDU general secretary Hermann Groehe said.
If the CDU chooses the SPD as their preferred partner, delegates of the leftist party will meet to decide whether to accept formal coalition negotiations.
Key issues are taxation and a proposed national minimum wage. Formal discussions are expected to continue for weeks.
The SPD, which has not won an election since 2002, has promised its members a vote on a final coalition deal.
The CDU’s previous coalition partner, the Free Democrats, narrowly failed to cross the 5% threshold for entering parliament at the election on 22 September.
The CDU took about 41.5% of the vote, the SPD won 26%, the Greens 8.4%, and the former communist Left Party 8.6%.
If a grand coalition is forged by the two main parties, like the one Mrs Merkel led in 2005, it faces the twin tasks of rebalancing the eurozone’s biggest economy and winning the support of the German public to tackle the eurozone’s debt and banking problems.