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Angela Merkel's hope of remaining chancellor received a boost as the Social Democrats performed a humiliating U-turn and agreed to talks on forming a coalition government.

German Chancellor Angela Merkel spoke out Saturday against holding another election, saying she intends to form a government as soon as possible.

Germany has been left at a political stalemate for more than two months after the September 24th election failed to return a good result for Mrs Merkel.

"I am absolutely not convinced that, if we can do nothing with the result, we should ask people to vote again", the center-right Christian Democratic Union leader said at a local party conference.

The parties had locked horns on key issues such as immigration and security but the collapse meant Merkel had just two choices open to her - form a minority government or head back to the polls.

"An alliance of the conservatives and SPD is the best option for Germany - better, anyway than a coalition with the Free Democrats and Greens, new elections or a minority government", Horst Seehofer told the Bild am Sonntag newspaper.

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                                                            |By Madeline Chamb
Image Zoom |By Madeline Chamb

"Ms Merkel is in no position to dictate terms", said the SPD's Malu Dreyer, premier of Rhineland-Palatinate state.

"The SPD will not refuse to talk".

Its leader, Paul Ziemiak, said any deal must contain recognizable conservative policies, particularly on migration and public finances.

Merkel, whose conservatives won most parliamentary seats in a September 24 vote but bled support to the far right, has said she wants to maintain sound finances in Germany, cut some taxes and invest in digital infrastructure.

German President Frank-Walter Steinmeier has stepped in to try to solve the crisis, putting particular pressure on the SPD - his party - to change its mind about a grand coalition.

Leading Greens lawmaker Claudia Roth told Deutschlandfunk radio that she doubted whether another GroKo was the best outcome, given its "anaesthetising" effect on the country last time.

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