German SPD tells Merkel no deal without minimum wage

* German left insists on new 8.50 per hour minimum wage

* Merkel to meet SPD leaders on Monday for more talks

* 'Grand coalition' with SPD most likely outcome of election

By Erik Kirschbaum

BERLIN, Oct 13 (Reuters) - Germany's opposition Social Democrats threw up a new potential obstacle to a 'grand coalition' government with Chancellor Angela Merkel on Sunday ahead of a new round of talks, saying they would insist on a national minimum wage.

Merkel's conservatives defeated her centre-left rivals in the Sept. 22 election, but she needs either the SPD or the Greens as a coalition partner and neither party has shown much desire to join her.

The possibility that talks could take months worries Germany's European partners, who fear it could delay decisions on measures to fight the euro zone crisis - such as a plan for banking union.

The SPD is seen as Merkel's most likely ally - in a revival of the right-left coalition that ruled from 2005-09 - and she is due to hold a second round of exploratory talks with the party on Monday.

Merkel is expected to present detailed offers at the talks, deputy SPD leader Andrea Nahles said on Sunday.

"There will be no government with the SPD unless there is a deal for a national minimum wage of 8.50 euros per hour," the left-leaning Nahles told the Bild am Sonntag newspaper. "I expect more concrete commitments from her at this meeting, not just on the minimum wage."

The SPD, which called for a minimum wage and higher income taxes in its campaign, suffered a drubbing at the polls.

Although the party has quietly backed away from its insistence on a tax hike, Nahles said members would not accept a coalition deal without a minimum wage. With no minimum wage in Germany, some employers pay as little as 3 euros ($4) per hour.

Merkel's Christian Democrats have opposed a national minimum wage, saying that it is up to wage negotiators to decide and that they only support "wage floors" in sectors. The conservatives are, however, strictly against tax increases.

Merkel's party did not respond to Nahles' comment on Sunday.

The once proud SPD, in disarray after seeing its support plunge to 25.7 percent from 40.9 percent in 1998, is wary about joining forces with Merkel again after seeing her get most of the credit for the performance of their last coalition.

Rank and file supporters would have the final say on whether to join a coalition in an unprecedented referendum that the SPD has promised to hold among its 472,000 members.

Merkel will need a government with broad enough public backing to tackle the euro zone's banking and debt problems.

She could expect to make compromises with either the SPD or Greens on higher taxes on the rich, the minimum wage and infrastructure investment for Europe's biggest economy.

By keeping the option of a coalition with the Greens open, Merkel has potentially strengthened her hand in talks with the SPD.