The German government has seen encouraging signals in recent days in negotiations to take over Opel and has positive expectations for talks this week, a government spokesman said on Monday.

Canada's Magna and RHJ International , a Belgium-based financial investor, are locked in a takeover battle for Opel, in which General Motors is relinquishing control in return for state support for the local carmaker.

GM, which holds 35 percent of Opel shares, and Germany, which will provide state aid, must agree on the buyer but so far the two have disagreed. Germany prefers the Magna offer and GM likes RHJ's bid.

There have been encouraging signals, government spokesman Klaus Vater said of recent negotiations with the two suitors.

As a result, the government has positive expectations with regard to the talks that are taking place this week, he added at a regular news conference.

Government sources said earlier that government officials and GM representatives will meet Magna and RHJ on Tuesday to work on forging a deal.

An Economy Ministry spokesman confirmed talks were planned for this week but gave no further details.

The encouraging signals Vater mentioned relate to contact between the German government and GM, government sources said.

Chancellor Angela Merkel's economics adviser, Jens Weidmann, held talks on Opel in the United States last week that were regarded in the government as constructive, the sources added.

GM's new board meets later on Monday and industry sources have said Opel will likely be discussed.

German Economy Minister Karl-Theodor zu Guttenberg said in a weekend newspaper interview the two suitors must improve their bids to win government backing.

Magna, a Canadian auto parts supplier, wants to expand Opel's full-scale car assembly business and forecasts high growth rates, particularly in Russia, home of its bidding partner, state-controlled bank Sberbank .

RHJ aims to shrink production to return Opel to profit and may be open to selling it back to GM at a later date.

In a blog entry posted on GM Europe's website last Tuesday, chief negotiator John Smith said he still expected a deal to close by the end of September.

The German states that are home to Opel plants and the federal government have expressed a preference for Magna's bid.

(Reporting by Gernot Heller, writing by Paul Carrel; Editing by David Cowell)

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