The centre-left party has given the green light for the start of negotiations with Chancellor Merkel's conservatives, as leader Martin Schulz made an impassioned speech calling for a United States of Europe 'by 2025'
Martin Schulz was re-elected leader of Germany's Social Democrats (SPD) on Thursday and given the green light to enter talks with Chancellor Angela Merkel on forming a new 'grand coalition' government.
The vote by delegates at a conference of his centre-left SPD clears the way for talks that could resolve Germany's political impasse.
Schulz had previously said the SPD would go into opposition, after its support fell to a post-war low in September's election.
He was re-elected head of the party with 81.9 percent of the vote, lower than the 100 percent he received when he first became leader in March.
Thursday's conference heard Schulz make an impassioned plea for deeper European integration and a "United States of Europe" by 2025.
"Europe does not always work for its people, rather too often for the big companies," he said, outlining a populist vision that goes well beyond conservative Merkel's own openness to limited structural reforms and bureaucratic streamlining.
On the coalition talks, he said: "We will explore every option... there is no automatic decision.
"But what there is, is my convictions. I want to improve people's lives, and we have to grab whatever chance we get to do that."
But outside the congress hall in Berlin, SPD youth activists, many of whom want the party to chart a distinctive course, handed out red cards reading "No Grand Coalition".
For Merkel, a new coalition with her former SPD partners is the best hope of extending her 12 years in power.
Post-election talks between her conservatives and two smaller parties have already failed.
Negotiations with the SPD are expected to begin in earnest in the new year.