German chancellor Angela Merkel smiles behind German flags at the party headquarters in Berlin, Sunday, Sept. 22, 2013, after the first exit polls have been published. (AP Photo/Michael Sohn)
BERLIN (AP) — Chancellor Angela Merkel won a stunning victory in Germany's elections, but she still faces the delicate work of forming a coalition government. She and top party officials were meeting Monday to talk strategy about reaching out to the center-left rivals they need to form a government.
Merkel's Union bloc scored its best result in 23 years Sunday to put her on course for a third term, winning 41.5 percent of the vote and finishing only five seats short of an absolute majority in the lower house. However, Merkel's coalition partner crashed out of Parliament.
Merkel looks likely to end up leading either a "grand coalition" government with the center-left Social Democrats of defeated challenger Peer Steinbrueck — reviving the alliance that ran Germany in her first term — or, less likely, with the environmentalist Greens.
"We have two possibilities: the Social Democrats or the Greens," Volker Kauder, the leader of her party's parliamentary group, told ARD public Television. "We will determine in our committees how the talks should go."
"We will provide our country with a strong government," Kauder added before heading into the talks.
Markets were fairly subdued in their response to the election results given the likely haggling over the formation of a government in the coming days. The DAX index of leading shares was down 0.1 percent at 8,663.
"The formation of a government is not straightforward at all," said Peter Schaffrik, an analyst at RBC Capital Markets. "If finding a new government takes too long, markets might get jumpy as regards the stability of the German government, particularly with key European issues coming up for a negotiation."
Merkel's coalition partners in the last government, the pro-business Free Democrats, won only 4.8 percent of the vote. They fell short of the 5 percent needed to win seats in Parliament for the first time in Germany's post-World War II history, paying the price for frequent government infighting and their failure to secure the tax cuts they pledged before going into government four years ago.
"We don't know what the chancellor will do at this point," Kauder said. "She has the mandate to build a new government."
Several weeks of negotiations are expected, whether Merkel forms a coalition with the Social Democrats or with the Greens.
Merkel's conservatives finished far ahead of Steinbrueck's Social Democrats, who won 25.7 percent of the vote — not much better than the post-war low of 23 percent they hit four years ago.
Their Green allies polled a disappointing 8.4 percent, while the hard-line Left Party scored 8.6 percent. Although the three parties on the left together hold a thin parliamentary majority, there's virtually no chance of their governing together.
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