The German chancellor remains optimistic that her CDU will be able to form a coalition with its preferred partner after next month's federal election despite setbacks for her party in two out of three state polls.
Merkel put a brave face on her party's heavy losses
Speaking to reporters in Berlin, Chancellor Angela Merkel rejected calls from some quarters in her party to change course after her Christian Democratic Union (CDU) took heavy hits in the states of Saarland and Thuringia.
Merkel said her party still had "every possibility of winning the federal election" and forming the next government in a coalition with the business-friendly liberal Free Democratic Party (FDP). Merkel insisted that voters saw her conservatives and the FDP as best-placed to lead Germany out of a steep economic downturn.
"We all agree that in light of the crisis, the issues are economic growth and jobs," she said. "Yesterday made clear what Germany needs: clear-cut and stable alliances," she said.
The chancellor also ruled out changing her own personal campaigning style and adopting a more forceful stance.
"I won't think in terms of camps but rather try to win over people. That's why I'm not going to become more aggressive, I'll focus on making better arguments."
"A wake-up call for conservatives"
On Sunday, Merkel's conservatives suffered a double blow when support slumped by more than 10 points for the CDU in the state of Saarland, on the French border, and Thuringia, in the former communist east.
Although the CDU remains the largest party in both states, its leaders could be unseated by leftist coalitions.
Saxon premier Stanislav Tillich was the undisputed CDU victor of the evening
In the eastern German state of Saxony, however, the outcome was markedly different. Merkel's party, led by the state's popular CDU premier, Stanislav Tillich, retained power, winning handily with more than 40 percent of the vote.
But the stinging defeats in Saarland and Thuringia have unnerved the conservatives. Senior members of Merkel's party voiced concerns about widespread fallout from the results, fearing a huge decline in support four weeks ahead of the national election.
"This is a wake-up call for everyone in the conservatives who had believed that an election victory on Sept. 27 was a given," Wolfgang Bosbach, deputy head of the conservatives' parliamentary group, told public broadcaster BR.
"We must translate the high popularity ratings of the chancellor into votes," Christian Wulff, the CDU premier of Lower Saxony said.
Social Democrats take heart
Sunday's results were a faint ray of hope for the Social Democratic Party (SPD), with whom Merkel has shared power since 2005. The party has struggled to capture the imagination of voters and has reached historic lows in opinion polls.
Despite losing its role in the government of Saxony as the junior partner, the party could become the kingmakers in Saarland and Thuringia.
SPD chancellor candidate Frank-Walter Steinmeier now has some success to build on
"Two things are clear: There have been dramatic losses for the conservatives and there is no desire for a conservative-FDP coalition," Frank-Walter Steinmeier, German foreign minister and the SPD's candidate for chancellor, told the Hannoversche Allgemeine daily.
"The Social Democrats now have the aura of a winner, something they will need for the coming weeks," Karl-Rudolf Korte, a political scientist at Duisburg-Essen University, said. "It could mean a turning point in the election campaign."
Alliance with the Left not easy for SPD
But the SPD still faces a tough task of turning around its dismal ratings. Merkel's party still leads by a large margin in opinion polls.
The Left party, descendants of the former ruling party of communist East Germany, and the FDP, were Sunday's biggest winners.
But any state cooperation between the SPD, the Green party and the Left party - descendants of the ruling party of former communist East Germany - could be targeted by the conservatives to warn of a "red wave."
Given the Left party's ties to the former East German communist party, the SPD has been loath to enter coalitions with the party in western Germany so far. The Social Democrats have however repeatedly ruled out any federal coalition with the Left party.
Outcome wide open
But on Monday, many German newspapers warned against reading too much into Sunday's election results.
"Interpreting this setback [for Merkel] as a clear signal of a turnaround in the battle for Berlin in four weeks is wide of the mark," the Financial Times Deutschland wrote.
Business daily Handelsblatt noted that "trying to predict the outcome of the federal election from Sunday's results is about as reliable as reading tea leaves."
Editor: Chuck Penfold