SPD leader Martin Schulz during the party congress in Berlin | Tobias Schwarz/AFP via Getty Images German SPD considers liberal-Green coalition ‘Traffic light’ coalition could give former European Parliament president Martin Schulz path to the chancellorship.

BERLIN – Angela Merkel's challenger for the German chancellorship in this fall's elections, Martin Schulz, wants his Social Democrats (SPD) to boost their chances of ousting her by forming a coalition with the Greens and the liberal Free Democrats (FDP), Spiegel magazine reported.

Dubbed the "traffic light coalition" because of the colors associated with the three parties, the plan has the backing of Schulz's predecessor as SPD party chief, Sigmar Gabriel, who is now foreign minister in the 'grand coalition' government led by Merkel's conservatives, Spiegel said, citing unnamed sources.

A high-ranking SPD lawmaker told POLITICO that many of his SPD colleagues supported such a coalition and had got positive feedback from the FDP. However, FDP party chief Christian Lindner called the report “fake news," adding: "Martin Schulz and I haven’t even met in person yet."

Currently, only four groups — Merkel’s conservative CDU/CSU bloc, the SPD, Greens and far-left Die Linke – hold seats in the Bundestag (lower house), but two more parties are expected to be represented after September's vote.

The FDP, a frequent partner of the conservatives, failed to pass the 5-percent threshold in the last election in 2013, but is likely to get back in this time and currently polls at 6 percent.

Another likely newcomer is the far-right Alternative for Germany (AfD,) which was founded in in 2013 as a protest party against the euro and has since then taken an increasingly anti-immigrant stance. It is currently polling at 7 percent.

The looming arrival of two more parties in the Bundestag mirrors a shift in political sentiment in Germany and makes coalition-building more complicated. The familiar pattern of the CDU or SPD using a smaller partner to form a majority could be replaced by three-party coalitions, especially since the SPD is keen to avoid another term as junior partners to the conservatives.

Merkel has signaled her willingness to discuss coalitions with all parties except Die Linke and the AfD; the SPD only rules out the AfD.

An alternative option would be yet another 'grand coalition' between the dominant CDU and SPD. Merkel has governed in coalition with the SPD for two of her three terms as chancellor, and with the FDP for one term.

Last Sunday, the CDU posted an unexpectedly big victory in a state election in Saarland, winning 40.7 percent to finish more than 11 percentage points ahead of the SPD, whose candidate had come out in favor of an alliance with Die Linke or possibly the Greens.

A day later, Merkel said she believed that promising to keep ruling with the Social Democrats in Saarland had helped her conservatives win, but that didn’t mean she’d use the same strategy in the national election this fall.