BERLIN (Reuters) - Chancellor Angela Merkel's chief of staff will become acting and temporary finance minister when Wolfgang Schaeuble leaves office, sources in her conservative party said on Friday.

The decision comes as negotiations to form a new government look likely to drag into 2018.

The sources said Merkel had decided that Peter Altmaier would take over from Schaeuble, who agreed on Wednesday to become president of the lower house of parliament to let someone from another coalition party take the role. .

Government spokeswoman Ulrike Demmer would not deny the news, first reported by Sueddeutsche Zeitung newspaper, but noted the Bundestag would not elect a new president until its first session, which must take place by Oct. 24.

"We will inform you about everything promptly after that," Demmer told a regular news conference.

Altmaier, a conservative and close confidant of Merkel's, would take over after the 75-year-old Schaeuble is nominated by the conservative alliance at a meeting on Oct. 17.

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He would then hand over to whoever is named by a new coalition partner, probably the pro-business Free Democrats (FDP), which urged Merkel to accelerate the process of forming a new government.

Fifty-nine percent of Germans support Merkel's aim to create a three-way coalition with the FDP and the environmentalist Greens, a survey for broadcaster ZDF found.

But a so-called "Jamaica" coalition - after the parties' colors of black, yellow and green that match the Jamaican flag - has never been tested at the national level and there are serious differences on migration, energy, taxes and Europe.

Complicating coalition talks is a debate between Merkel's Christian Democrats (CDU) and their Bavarian sister party, the CSU, which lost 10 percentage points in Sunday's vote.

Eager to claw back support ahead of state elections in 2018, the CSU has redoubled its calls for limiting migration, something Merkel has opposed.

Only 23 percent of Germans would favor the continuation of the "grand coalition" of Merkel's conservatives and the Social Democrats (SPD), which governed for the last four years.

Almost two-thirds of those polled supported the SPD's decision to go into opposition at the national level after its worst election result in the post-war era on Sunday.

Andrea Nahles, the SPD's newly elected parliamentary leader, said the conservatives, the FDP and Greens "need to and will get(a coalition agreement) done".

"If Chancellor Merkel thinks the SPD is a tactical reserve option for an emergency, then she is wrong," Nahles told Bild.

Altmaier himself suggested negotiations may take longer than four years ago, when a deal was done by Christmas.

"That's what I'm hoping for, but what's decisive is the substance, not the date," Altmaier said in an interview published by Focus magazine on Friday.

Exploratory talks are expected after the Oct. 15 election in the state of Lower Saxony, now ruled by a coalition of the SPD and Greens.

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But Wolfgang Kubicki, deputy leader of the FDP, urged Merkel to get the process started sooner.

"Everyone knows what needs to be done. There's no reason to wait any longer," he told the Handelsblatt newspaper. He said the conflict within conservatives "should not result in Germany remaining without a new government for a long time."

Underscoring the problems still ahead in forming a government, key officials with the Greens and FDP on Friday questioned a push by Merkel's conservatives to implement facial recognition technology in video surveillance.

Kubicki told Der Spiegel: "Widespread facial recognition would be a significant step toward a surveillance state."

Konstantin von Notz, deputy of the Greens in parliament, echoed his concerns, adding, "Then we wouldn't be living in a free country anymore."

(Reporting by Michelle Martin and Andrea Shalal; Editing by Jeremy Gaunt)