German government talks collapse; Merkel seeks to reassure

German government talks collapse; Merkel seeks to reassure

Chancellor Angela Merkel failed to reach a compromise on Sunday night on forming a coalition government with the Free Democrats (FDP) and the Greens over hot-button issues in Germany.

Talks about forming a three-party coalition government in Germany dissolved after the free-market liberal Free Democratic Party pulled out on Sunday.

She said she would consult with Germany's president later in the day to brief him on the negotiations and discuss what comes next. The collapse signals the limit of her pragmatic, non-ideological style of governing and leaves her options for staying in power for another four years dramatically narrowed.

The Free Democrats also expressed concern about what the moves would mean for jobs and Germany's economic competitiveness. "As chancellor, as caretaker chancellor, I will do everything to make sure this country continues to be well governed through the tough weeks ahead".

A exhausted looking Merkel said she would stay on as acting chancellor and would consult with President Frank-Walter Steinmeier on how to move forward, adding that a deal had been within reach. Both scenarios would be uncharted territory for Germany, which has had only eight chancellors in the seven decades since World War II.

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Failure to form a government in Europe's largest economy may have implications for everything from euro zone reforms to European Union policy on Russian Federation and Turkey. The DIHK Chambers of Industry and Commerce said a prolonged period of uncertainty would be bad for the economy.

That sentiment was echoed by Green party co-chair Cem Özdemir, who said that he and his team had always shown a readiness to compromise on key issues. FDP head Christian Lindner said that after weeks of negotiations the parties could not find a "basis of trust". The FDP also wants to allow countries to leave the euro in an orderly way without quitting the EU.

Merkel said she regretted the breakdown of talks, noting that she and her conservative bloc believed they were "on a path where we could have reached an agreement".

Many former voters of the CDU and its Bavarian CSU sister party switched allegiance to Alternative for Germany, which ran against the political establishment and Merkel's liberal asylum policy in particular. German Chancellor Angela Merkel has been under constant pressure for her handling of the refugee crisis.

The centre-left Social Democrats (SPD), Merkel's current coalition partners who were the second-biggest party in the election, have ruled out a repeat of an alliance with her conservatives, who won the vote but were left with fewer seats.

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