Germany's Social Democrats (SPD) decided Friday to help resolve a deadlock in talks to form a coalition government, dropping its earlier refusal to consider governing with Merkel's conservatives.
As coalition talks descend into chaos, however, it could spell the end of Mrs Merkel's career at the top of German politics.
Germany was facing the prospect of new elections after coalition talks between Ms Merkel's Christian Democrats (CDU) and smaller parties collapsed last week.
"An alliance between the conservatives and the SPD is the best option for Germany, better in any case than "Jamaica", new elections or a minority government", said Seehofer, who heads Merkel's Bavarian Christian Social Union (CSU) sister party.
German President Frank Walter Steinmeier speaking in Jerusalem
Hubertus Heil, the party's general secretary, said: "The SDP is deeply convinced there should be discussions".
The head of the group told the paper the conservatives should pursue a minority government if they fail to agree a deal with the SPD.
Leading SPD politicians however signalled they were ready to flex their muscles.
German President Frank-Walter Steinmeier has stepped in to try to solve the crisis, putting particular pressure on the SPD - his party - to change its mind about a grand coalition.
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An Emnid survey for the Bild newspaper yesterday showed that 52% of Germans were in favour of a repeat grand coalition. However, after the FDP backed out of preliminary talks - citing ideological differences - Germany's longtime leader has been left scrambling for a solution after two months without a new government.
Schulz had previously ruled out entering into another "grand coalition" with Merkel after his party suffered its worst ever result in the federal elections in September.
Mr Lindner told reporters: "It is better not to govern than to govern badly".
She said on Saturday that she would pursue a grand coalition.
DMK announces candidate for RK Nagar by
These two leaders had been in opposing splinter groups of the party the last time the by-election had been announced. He hoped the by-election would be held in a fair manner without money power being allowed to play a part in it.
There was also talk of a "Kenya"...
"The hurdles are lower for them than for us", Lindner told Bild.
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