Berlin: German Chancellor Angela Merkel is facing her biggest political challenge in 12 years after Free Democrats (FDP) walked out of talks with her CDU/CSU bloc and Greens to form a government late on Sunday.
Merkel will now discuss the way forward with President Frank-Walter Steinmeier who has the power to call fresh elections.
With FDP out, Merkel can either form a minority government with Greens or join hands with the social democratic SPD to form a government with a comfortable majority.
But SDP, which suffered mauling in September elections, may rather sit in the opposition.
Sunday’s three-way talks collapsed over tax, refugees and environmental issues.
Emerging from talks, FDP leader Christian Lindner said there was “no basis of trust” among the parties and it is better not to rule than to rule badly.
Greens leader Simone Peter said the talks failed because of the “dubious and calculating” FDP.
Merkel’s CDU did not fare well in the recent elections and may void another election.
It is also concerned over the rise of the far-right, anti-immigrant Alternative for Germany (AfD) which made shock gains in the September elections and became the third largest party in the Bundestag.