BERLIN (Reuters) - The leader of Germany’s Social Democrats (SPD) said on Friday he ruled out no option for forming a new government but stressed that a re-run of the outgoing “grand coalition” with Chancellor Angela Merkel’s conservatives was not a done deal.

FILE PHOTO: The leader of the Social Democrats (SPD) Martin Schulz gives a statement at the party headquarter in Berlin, Germany, November 27, 2017. REUTERS/Axel Schmidt

Germany, Europe’s political and economic powerhouse, has been struggling to build a new government since a Sept. 24 national election. Merkel’s conservative bloc and the SPD lost support in that vote, while an anti-immigrant party surged into parliament, seriously complicating the coalition arithmetic.

Merkel, her own political future on the line after 12 years at the helm, is making overtures to the center-left SPD - her partner in government over the past four years - after her bid to form a three-way coalition with two smaller parties failed.

The SPD, which had wanted to go into opposition to rebuild after suffering its worst post-World War Two election result, fears its distinctive identity and policy ideas will again be smothered in any tie-up with Merkel’s bigger center-right bloc.

“Regarding the formation of a new government, there was broad support for not ruling any option out,” SPD leader Martin Schulz said after party board discussions in Berlin.

Schulz, who held talks late on Thursday with President Frank-Walter Steinmeier, Merkel and her Bavarian ally Horst Seehofer, denied he had agreed to another grand coalition.

“I can clearly deny the media report about me having given the green light for grand coalition negotiations. This is simply wrong,” Schulz said, adding that the report appeared to be based on sources within Merkel’s conservative CDU/CSU bloc.

He added that whoever circulated such reports was damaging trust.

Ties between the SPD and conservatives - still sharing power in a caretaker capacity - have already been strained this week after a conservative minister backed extending the use of a weedkiller at the European Union level against the SPD’s wishes and without its prior knowledge.

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“We have a lot of options for building a government. We should talk about each of these options. That’s exactly what I will propose to the party leadership on Monday,” Schulz said.

The SPD will hold a party congress in Berlin on Dec. 7-9, where it is expected to debate its options.

NEW GOVERNMENT BY MARCH?

Other options apart from a grand coalition include a minority conservative government - which the SPD could support on a case-by-case basis, or fresh elections. Merkel has said in the past she does not want to lead a minority government.

Merkel’s camp said the ball was in the SPD’s court.

“It’s now up to the SPD to provide clarity,” said CDU manager Klaus Schueler. “The fact that we underlined today that we are prepared to enter such talks with the SPD shows that we’re aiming to bring these talks to a successful conclusion.”

Another senior member of Merkel’s Christian Democrat Union (CDU), Mike Mohring, said he was hopeful for an eventual grand coalition and expected a new government to be formed by March.

“The way for a grand coalition has been paved,” Mohring told Reuters after taking part in a teleconference where Merkel had briefed the federal board of her Christian Democratic Union (CDU) on Thursday night’s talks with Schulz and the president.

Schulz, a former president of the European Parliament, has said he wants changes in Germany’s approach to the European Union and in economic and social policy.

In an interview with Der Spiegel magazine, Schulz said the SPD backed French President Emmanuel Macron’s call for closer eurozone integration, including a new finance minister for the currency bloc - ideas that face resistance from conservatives.

“Giving Emmanuel Macron a positive answer will be a key element in every negotiation with the SPD,” Schulz was quoted as saying in the interview made available on Friday, adding that he also backed a joint EU tax policy.