* Metro CEO says store alliance to be highly profitable -TV
* Arcandor cancels Metro meeting, tries to set new date
* Arcandor shares end 1.7 pct lower, Metro up 1.8 pct
(Adds Metro CEO and govt comment, updates share price)
FRANKFURT, May 26 (Reuters) - A leading member of Chancellor Angela Merkel's conservatives sees no chance of state aid being granted to retail and tourism group Arcandor, parliamentary sources told Reuters on Tuesday.
Arcandor, which has long struggled to break even, has been dragged deeper into crisis by the global recession, prompting its chief executive to warn that it could go bust within weeks if it does not get more than $1 billion in state aid.
Arcandor's request for state support has been sharply criticised by its main rival Metro as well politicians, who say the retailer's problems do not stem from the financial crisis but from management mistakes.
Companies must prove that they are struggling as a result of the markets meltdown in order to tap the state bailout fund.
Christian Democrat parliamentary floor leader Volker Kauder told a parliamentary meeting of Merkel's conservatives he saw "no chance" of Arcandor getting approval on its bid for aid, participants in the discussion said.
As an alternative to state aid Metro has proposed to combine its department stores Kaufhof with Arcandor's Karstadt.
Such an alliance would be highly profitable and could easily survive the next 30 years, Metro Chief Executive Eckhard Cordes told German television station N24 in an interview.
The two retailers kicked off talks last week to sound out a possible tie-up and were set to meet this week, but Arcandor cancelled because the German government was due to discuss Arcandor's call for state support in the coming days.
The talks were only postponed and not off, a spokesman for Arcandor said, adding they were trying to set a new date.
Metro confirmed that the top-level meeting was called off.
Arcandor shares, which fell more than 25 percent in the previous session on fears the government would not come to the rescue, closed down 1.7 percent at 1.74 euros. Metro shares ended up 1.8 percent at 37.00 euros.
(Reporting by Eva Kuehnen, Nikola Rotscheroth, Matthias Inverardi and Markus Wacket, Andreas Moeser and Madeline Chambers in Berlin; Editing by David Cowell)