Angela Merkel’s fourth term as German chancellor was plunged into doubt as talks between four parties to form a coalition government collapsed.
The decision by the the pro-business Free Democrats (FDP) to pull out of negotiations, citing irreconcilable differences, means that Merkel’s conservative bloc will either seek to form a minority government with the Greens or a new election will be held.
Other options for Merkel would be attempting to continue her current coalition with the Social Democrats, which that party has said it will not do.
Speaking to reporters, Merkel said she would meet the German president to inform him that she had failed to form a coalition government.
The decision to meet President Frank-Walter Steinmeier, who has the power to call a new election, signaled that Merkel would not seek a minority government with the Greens after the FDP unexpectedly pulled out of the coalition talks.
“It is a day of deep reflection on how to go forward in Germany,” Merkel told said.
“As chancellor, I will do everything to ensure that this country is well managed in the difficult weeks to come.”
The hope following elections in September was for the formation of a “Jamaica” coalition - nicknamed as the parties’ traditional colours mirror the Jamaican flag.
It would have meant forging a coalition between between Merkel’s Christian Democratic Union (CDU), its Bavarian sister party the Christian Social Union (CSU), the FDP and the Green party.
But FDP leader Christian Lindner walked away from the talks and told reporters: “Today there was no progress but rather there were setbacks because targeted compromises were questioned.”
Merkel was weakened after the election as voters angry with her decision in 2015 to open Germany’s borders to more than a million asylum seekers punished her conservatives by voting for the Alternative for Germany (AfD) far-right party.
There is little appetite for a second vote, especially as the main parties fear that the populist AfD would win more than the almost 13 per cent of votes it secured in September.
Failure to form a government in Europe’s largest economy could have implications for everything from euro zone reforms to European Union policy on Russia and Turkey.
Merkel has used her power to broker compromises on Greece within the single currency bloc and to keep in place EU sanctions against Russia over its backing of separatists in eastern Ukraine.