* Co-leaders don't insist on fixed date for coal-fired plants
* Also water down demand for ban on combustion engine cars
By Michael Nienaber
BERLIN, Nov 7 (Reuters) - The leaders of Germany's Greens said on Tuesday they would not insist on fixed dates to shut down coal-fired power stations and ban cars with internal combustion engines, dropping two key demands ahead of crunch coalition talks with other parties.
German Chancellor Angela Merkel, whose conservative bloc came first but lost seats in a federal election in September, is trying to forge a tricky three-way alliance with the Greens and the pro-business FDP that is untested at national level.
Despite weeks of exploratory talks, the parties remain far apart on climate, energy and immigration policy and they disagree on where the blame lies for the lack of progress.
A lack of progress in coalition talks would mean that Germany faces a lengthy period of drift at a time when Europe's biggest economy is firing on all cylinders and many in Europe look to Berlin for leadership on issues ranging from euro zone governance to trans-Atlantic ties.
"For us, it doesn't matter if the last coal-fired power station is off the grid in 2030 or 2032. That's where we are pragmatic," Greens co-leader Simone Peter told Rheinische Post newspaper ahead of the next round of negotiations.
Peter said, however, that it was crucial to agree on further climate protection measures in order to reduce Germany's CO2 emissions by 40 percent until 2020 compared to the level of 1990 as Merkel had promised earlier.
Merkel and her parliamentary floor leader Volker Kauder both said on Monday they would stick to Germany's climate goals.
Co-leader Cem Ozdemir also signalled his party's readiness to compromise on car policy after an emission scandal at Germany's leading automaker Volkswagen plunged the car industry in Europe's biggest economy into a major crisis.
"It's clear to me that we alone cannot enforce the end date of 2030 for the approval of fossil combustion engines," Ozdemir told Stuttgarter Zeitung and Stuttgarter Nachrichten newspapers in an interview published on Tuesday.
But it was important for the Greens that the potential coalition partners agreed on "a clear commitment that we do everything we can to get the vehicles of the future - connected, automated and emission-free", Ozdemir added.
He pointed to measures such as the introduction of special tax incentives for company cars with low or zero emissions and a bonus-malus system in favour of electric cars.
Greens parliamentary floor leader Anton Hofreiter said it was now up to the other parties to move and drop some of their election campaign pledges so that a coalition agreement could be reached.
"We show our willingness to compromise, and in order for the whole thing to work, the other side also has to show its willingness to compromise," Hofreiter told ZDF broadcaster. (Editing by Matthew Mpoke Bigg)