Germany's Social Democrats said Friday they will begin talks with Angela Merkel's Christian Democrats, who are trying to put together a "grand coalition" with their election rivals.

Despite a convincing win at the polls, Merkel needs to form an alliance with either the Social Democratic Party (SPD) or the Greens to ensure a majority in parliament.

"The SPD is ready for discussions," the party's leader Sigmar Gabriel said following a meeting of SPD leadership.

The announcement came on the same evening as the party's defeated candidate in Sunday's election, Peer Steinbrueck, said he would no longer hold a leadership role in the SPD, according to a party source.

Some 200 SPD members met behind closed doors at Friday's mini-congress to discuss the party's next move after it came second in the polls with just under 26 percent.

The prospect of a left-right "grand coalition" between the CDU and SPD has the backing of the German public, a poll for ZDF public television showed Friday, with 58 percent saying they would find it "good."

Despite agreeing to talks, many in the SPD are still haunted by memories of the party's last tie-up with Merkel during her first term from 2005-09.

Then, supporters left the party in their droves, punishing it with its worst ever ballot box result, leaving many SPD members wary of signing up to any new coalition.

Prior to the meeting, SPD Deputy Johannes Kahrs said the party should not accept anything less than an equal partnership. He said key SPD demands included a national minimum wage, equality for gays and lesbians, a rent cap and tighter regulation of short-term and temporary work contracts.

AFP