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German Social Democrat leader Martin Schulz denied on Friday he had given the green light for a new coalition with Angela Merkel's conservatives, insisting that multiple options for forming a government were still on the table.

"The reports are plainly and simply wrong", said the SPD leader, Martin Schulz, after claims in the German newspaper Bild that the two parties had agreed to begin exploratory talks on a new coalition following a meeting with the German president, Frank-Walter Steinmeier, on Thursday.

"Regarding the formation of a new government, there was broad support for not ruling any option out", Schulz said at the SPD headquarters in Berlin.

Schultz had initially refused to consider another "grand coalition" with Merkel after a disastrous showing of the Social Democrats in the election on September 24, saying the Social Democrats needed to go into opposition.

Schulz previously opposed a "grand coalition" with the CDU/CSU, arguing that the election result meant voters had rejected the option of another grand coalition between the SPD and the CDU/CSU.

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Speaking after Schulz's statement, CDU chief executive Klaus Schüler said his party respected what the SPD chairman had to say and would wait for the Social Democrats to make a decision about whether to officially pursue talks. Her attempts to form a three-way tie-up with the pro-business Free Democratic party (FDP) and the Greens failed.

Merkel and Erdogan also spoke about the importance of cooperating against terror groups, including Kurdish rebels and agreed to increase discussions once a new German government is formed. "We have many options". "The fact 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".

"The way for a grand coalition has been paved", Mohring told Reuters after taking part in a teleconference where Merkel had briefed the CDU federal board on Thursday night's talks with Schulz and the president.

Angela Merkel faces demands for sweeping European Union reform and further integration as the price of a new coalition government in Germany, it emerged on Friday.