Berlin – German Chancellor Angela Merkel admitted Sunday she faces tough talks before she can forge a new coalition, after an election result which saw her conservative bloc achieve its worst result in her 12 years in power. Merkel ruled out forming a minority government after Sunday's election, but declined to say whether she expected to form a new government by the end of the year.

Tough talks to form new government

"I have the intention that we should come to a stable government in Germany," Merkel told a televised election post-mortem by party leaders, the so-called elephant round. Instead, Merkel's Christian Democrats (CDU) and their Bavarian-based Christian Social Union (CSU) allies are now likely to be forced to negotiate a new and potentially fractious three-party coalition following a 8 percentage-point drop in the CDU-CSU's vote. That will mean coalition talks with the environmental Greens and the pro-business Free Democrats (FDP) after her current partner, the Social Democrats (SPD) plunged to 20.5 per cent, according to interim results released by the country's election office.

"It's perfectly clear that the electorate has directed us to go into opposition," said SPD chief Martin Schulz, who ruled out forming a coalition with conservatives. If projections hold, a Merkel-led coalition with the FDP and the Greens would have a narrow parliamentary majority in the new Bundestag of about 700 lawmakers.

But Sunday's results also mean the CDU-CSU will have to win back the voters who had switched to the far-right Alternative for Germany (AfD) by "listening to their concerns and their fears and primarily by conducting good politics," Merkel told supporters. About 21 per cent of AfD voters told pollsters that they had voted CDU-CSU in the last election in 2013. In the eastern state of Saxony the populist party gained the most votes, just ahead of the CDU.

Third-biggest parliamentary force

Founded in 2013, the anti-Islam, anti-Europe and climate change sceptic AfD is now set to emerge from the election as the country’s third-biggest parliamentary force, with more than 90 lawmakers after winning around 13 per cent of the vote. The Central Council of Jews in Germany said the surge in support for the AfD was the biggest challenge facing post-war Germany, while demonstrators took to the streets in many German cities to protest the party's election success. Underlining the difficulties facing Merkel in forming a new three-party coalition, FDP, Green and CSU leaders clashed during the often acrimonious one-hour long television post-mortem.

Green Party leader Katrin Goring-Eckardt warned that talks to form a new so-called Jamaica coalition - the colours of the three parties are yellow, green and black - led by Merkel could be difficult. "We are not easy partners," she said.  But, Merkel will need partners. Support for the CDU-CSU dropped to 33.5 per cent on Sunday, down from the 41.5 per cent it reached in the last election in 2013, according to interim results from Germany's federal electoral return officer. Merkel also suffered a strong swing against her in her own electorate in north-eastern Germany, underlining the anger in parts of the nation about her decision two years ago to open the nation's borders to about 1 million refugees.

Helping to drag down the overall CDU-CSU vote was a plunge in support for the CSU, which only fields candidates in Bavaria, where support slumped in comparison to four years ago. CSU chief and Bavarian Premier Horst Seehofer declared after the AfD vote that the CDU-CSU now needed to respond to "a right-wing flank" by strengthening the right-wing message of the Merkel bloc. Sunday's result for the CDU-CSU was lower than the 33.8 per cent that the conservatives scored in 2005, when Merkel edged the centre-left Social Democrats (SPD) from power.

Schulz described his party's results as "difficult and bitter," but insisted he would remain its leader, while the mood at the AfD was significantly brighter. "We've made it - we will change this country," declared Alexander Gauland, who called on Germans to stop atoning for their past and to be proud of the soldiers they sent to the world wars. The FDP was one of the winners of election night after it bounced back into parliament with 10.8 per cent of the vote, after it was wiped out of the Bundestag in 2013 because it failed to reach a 5-per-cent requirement for entry. Hard-left party Die Linke also managed to reverse losses from 2013 by picking up 8.8 per cent of the vote on Sunday. The election also gave the Greens something to celebrate, with the vote for the environmental party rising to 8.8 per cent, after dropping more than 2 percentage points in the last election.