Ahead of talks on Tuesday, Martin Schulz suggested a “cooperation coalition” deal as the impasse following September’s disastrous election passed the 10-week mark.
Mr Schulz suggested an agreement based on a dozen headline policies and said the rest could be negotiated during a four year term.
Some in the party view the “cooperation” deal as an answer to Germany’s political turmoil, which has left the country weakened during a crucial period for the EU.
Social Democrat leader Martin Schulz said he would lead the SPD into opposition after a disastrous showing in September’s national election, but was forced to reconsider after Mrs Merkel’s attempts at forming a three-way government collapsed, leaving Europe’s economic powerhouse without a new government.
SPD members and lawmakers are reluctant to sign up for a simple repeat of the four-year Merkel-led grand coalition.
General secretary of the SDP Lars Klingbeil said the party is open to all possibilities, adding: “The ball is now in Dr Merkel’s court.”
The idea, under which the SPD would contribute ministers to a Mrs Merkel-led cabinet, would allow the party to support Mrs Merkel’s conservatives in areas where both parties were in agreement but leave other areas subject to ad hoc haggling between parliamentary parties.
It is far from a done deal, with some of the SPD’s own leadership believing early elections were better, party officials said.
Julia Kloeckner, vice-chair of Merkel’s Christian Democrats (CDU) said: “I have no interest in half-agreements with the SPD. Either you want to govern or you don’t.”
She tweeted: “Having all the ministerial jobs but no full government responsibility is cherry picking. You can’t be a little bit pregnant.”
The proposal comes after Mrs Merkel ruled out forming a minority government, declaring Germany needs stability in the wake of the September election which has left the nation in crisis.
Speaking yesterday, Mrs Merkel affirmed that the country needs a stable government after the election results in September.
Mrs Merkel insisted having a stable government is a “prerequisite” for sorting out problems in Germany, or the EU.
The Chancellor, 63, said: “We want to have the talks and also think that they should be run quickly, of course thoroughly, but the benchmark must be: what does our country need.
“We are now focusing on building a stable government. But it is also true that a minority government would certainly not be a stable government in any case.
“And that’s why it’s one more reason, since people have voted in Germany, to say we are focusing on building a stable government. “
The SDP and Merkel’s CDU will begin talks in Berlin tomorrow.
Mrs Merkel said: “I favour quick talks. And I think a stable government is the basis on which we can work best with France and for Europe.
“I am not exaggerating when I say that the world is waiting for us to be able to act”.