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BERLIN (Reuters) - Chancellor Angela Merkel’s Bavarian allies still hope a three-way coalition government can be formed by the end of the year even though negotiators made little progress on bridging deep divisions this week, a senior party official said on Friday.

Merkel is trying to unite her conservative alliance, which consists of her CDU and its Bavarian CSU sister party, in a pact with the Greens and the pro-business Free Democrats to form a government. The conservatives placed first but lost seats in an election last month.

After meeting for 11 hours on Thursday, the three camps resigned themselves to further talks next week after making little headway on the contentious issues of immigration and climate policy.

“Our aim is for the exploratory talks to be at the stage in mid-November where we can tell our (party) committees ‘yes, this works, let us begin concrete negotiations’,” said Manfred Weber, a senior member of the CSU who is involved in the talks.

“And then I hope we will have a new government by the end of the year,” he told broadcaster Bayerischer Rundfunk, but added: “It will be very difficult.”

Immigration was the most divisive topic on Thursday. Many conservatives want to take a harder line after blaming their election setback on Merkel’s decision to open Germany to more than a million mainly Middle Eastern migrants in 2015 and 2016.

Negotiators will meet again next Monday and Thursday, by which time they want to seek a solution on refugee policy, sources close to the talks said.

An agreement reached between Merkel’s CDU and the CSU to cap annual refugee numbers had to be the basis of any coalition accord, Andreas Scheuer, CSU general secretary, said after Thursday’s talks. The Greens oppose a refugee cap.

Politicians say it could take months to form the coalition, leaving Germany hobbled as the European Union looks to its wealthiest country for leadership on governance reform.