Michael Schumacher is close to signing a deal with Mercedes to come out of retirement and compete in Formula One next year, Germany’s Bild newspaper reported on Saturday.

Mercedes has signed Germany’s Nico Rosberg for 2010 but has yet to name his teammate with media speculation swirling around the retired 40-year-old German.

Bild said a deal with the seven-time world champion could be announced as soon as this week, without citing any sources.

Schumacher was lined up for a brief comeback this year as a stand-in for injured Ferrari driver Felipe Massa but had to pull out due to his own neck problem.

The Mercedes Grand Prix chief executive  said on Thursday an announcement on the second driver could come before the Christmas holiday but was more likely to be in early January. He said there were about four names on the short list.