Bavarian Prime Minister and head of the Christian Social Union (CSU) Horst Seehofer's decision adds to momentum for a new "grand coalition" to break the political deadlock in Germany.
German Chancellor Angela Merkel has rejected new elections and wanted to form a new government quickly, as a effect of the failed government coalition talks with the Free Democratic Party (FDP) and the Greens.
To that end, last week Merkel commented that she would be open to new elections instead of creating a minority government.
Schulz indicated on Friday that the SPD might consider coalition talks with the CDU/CSU alliance, although his party had initially ruled out this possibility.
German Chancellor Angela Merkel spoke out Saturday against holding another election, saying she intends to form a government as soon as possible.
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She said: "Europe needs a strong Germany, it is desirable to get a government in place quickly".
An Emnid poll showed on Sunday that 52 percent of Germans backed a grand coalition.
With Germany's political map in flux, her aversion to governing without a parliamentary majority and the SPD's refusal to be her junior partner for a third time may both be negotiable.
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.
After four years ruling together with the CDU and receiving its worst ever results in the federal vote, the SPD announced that it had no intention to enter into another grand coalition and would prefer to remain an opposition voice in the Bundestag.
It is not yet clear whether the SPD will enter into a new coalition with Mrs Merkel, or whether it will only offer to prop up a minority government from the outside, the report said.
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