Germany's SPD says open to talks with Merkel on backing government led by her

German acting Chancellor Angela Merkel arrives for the EU Eastern Partnership Summit in Brussels on Nov 24, 2017. PHOTO: EPA-EFE

BERLIN (BLOOMBERG) - Germany's biggest opposition party said it's open to talks on backing a government led by Chancellor Angela Merkel, offering a way to restore political stability to Europe's biggest economy.

Social Democrat Secretary General Hubertus Heil told reporters that the party is ready to start discussions if that's the course that President Frank-Walter Steinmeier, who is trying to broker a deal, decides upon.

Mr Heil spoke after an eight-hour meeting of the SPD leadership in Berlin that wrapped up in the early hours of Friday (Nov 24).

"The SPD is firmly convinced that talks are needed," Mr Heil was quoted as saying by Deutsche Presse-Agentur newswire. "The SPD won't reject such talks."

Two months after an inconclusive election that brought a far-right party into Parliament, Dr Merkel is still trying to work out how she can govern after her effort to forge a deal with three smaller parties fell apart on Sunday.

While the Chancellor is sceptical about ruling without a parliamentary majority and the SPD leader Martin Schulz wants to avoid a formal coalition, the two sides are inching closer as they try to bring stability to the country.

The euro was trading a shade higher at US$1.1855 at 9.33am in Berlin, registering a fourth straight day of gains since the collapse of coalition talks triggered its biggest decline in almost a month on Monday.

Mr Schulz is facing calls by SPD lawmakers and state leaders to drop his refusal to join a Merkel coalition.

Mr Schulz favours pledging SPD support for a minority government, an arrangement Dr Merkel wants to avoid. That arrangement might involve an SPD pledge to support Dr Merkel on legislation on a case-by-case basis without joining her administration.

Ms Manuela Schwesig, the Social Democrat Prime Minister in the eastern state of Mecklenburg-Western Pomerania, said the party's willingness to talk did not necessarily mean it was ready to join another "grand coalition" with Dr Merkel, the alliance that underpinned two of the chancellor's three terms.

"For us, it's clear that if there are talks, then we will also take part in these talks," Mr Schwesig told ZDF television on Friday. "Just because we're saying that we're open to talks, it's not automatically a discussion about a grand coalition, and certainly not a vote for a grand coalition."

Whatever the SPD decides, it may require the approval of members, Mr Heiko Maas of the party leadership committee told ZDF television late on Thursday.

The SPD is holding a party congress in Berlin from Dec 7 to Dec 9, when Mr Schulz will be up for re-election as chairman.

After leading the SPD to its worst result since World War II in September, Mr Schulz is under pressure from within his party to step aside, a move that might help clear the way for a grand coalition.

Mr Heil sought to quell the speculation on Thursday, saying "personnel matters" are not on the agenda for now.

Mr Schulz met with Mr Steinmeier on Thursday as Germany's head of state, a former SPD foreign minister, tries to secure a stable government.

As they prepare to engage with Dr Merkel, the Social Democrats are split between those on the left who see the two coalitions with Dr Merkel as the main reason for the slump in its support and those who spy a chance to push through policies such as expanded healthcare and reaching out to French President Emmanuel Macron to strengthen the euro area.

Many in the SPD would prefer to stay out of government to prevent the far-right Alternative for Germany, which entered Parliament for the first time with 12.6 per cent of the vote in September, from becoming the biggest opposition force.

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