The free-market liberal FDP exited from talks and negotiations on forming a coalition government, leading to an uncertainty in Germany.
Christian Lindner, the FDP leader, claimed there was no basis of trust with Chancellor Angela Merkel’s conservative CDU bloc and the Greens.
Mrs Merkel is scheduled to meet German President Frank-Walter Steinmeier, who has the power to call snap elections.
In September’s election, CDU still managed to rack up almost one-third of the total votes and got 246 seats for parliament, but many voters turned away from the mainstream parties.
The chancellor would meet the German president on Monday to formally inform the president that negotiations on forming a coalition had failed.
Aside from snap elections, Mrs Merkel could possibly form a minority government with the Greens, whom she has been working with for 12 years.
German daily Frankfurter Allgemeine Zeitung described the development as the worst crisis of Merkel’s 12 years in office.
“Today there was no progress but rather there were setbacks because targeted compromises were questioned,” the FDP leader Christian Lindner said.
Tax, asylum and environmental policies had been the pivotal subjects of the talks and were reportedly the source of division among parties involved in the talks.
The most debated topics had been over whether Syrian refugees should be permitted to bring family members to join them in Germany.
Merkel’s CDU bloc, wary of the electoral success of the AfD, wanted to extend a moratorium on so-called family reunions.
The Social Democrats, the second-largest party in parliament, have ruled out the possibility of them joining a coalition government with Mrs Merkel.
More details to follow. Image 1 of the new German parliament from BBC