Spain's socialists reject pact with ruling People's Party
Such an alliance would be one of the only combination of political forces allowing a stable government in Spain after an inconclusive election on Sunday.
"We say 'no' to Rajoy and his policies," Sanchez told a news conference after meeting with Rajoy.
"The Socialists will work so that there is a new government, a government of change, with progressive ideas and capacity for dialogue," he also said.
(Reporting by Julien Toyer; Editing by Paul Day)