Merkel might not be politically dead, but if the SPD does a coalition with her, SPD will be dead. They'll be lucky to even get double digits by the next election if they go into a grand coalition.
Because people voting for the SPD want a left-wing government and have left-wing alternatives (the Greens and Linke). It wouldn't be a problem (for them, but probably for the CDU) if the SPD were leading a grand coalition, but as the junior partner they're just tagging along to a fundamentally right-wing government that their voters don't want.
