Germany in political turmoil as coalition talks fail

Chancellor Angela Merkel was left scrambling for ways to drag Germany out of crisis today after high-stakes talks to form a new government collapsed, potentially forcing Europe's top economy into snap elections.

Germany now faces weeks, if not months of paralysis with a lame-duck government that is unlikely to take bold policy action.

With no other viable coalition in sight, Germany may be forced to hold new elections that risk being as inconclusive as September's polls.

Merkel, whose liberal refugee policy has proved deeply divisive, had been forced to seek an alliance with an unlikely group of parties after the ballot left her without a majority.
 

But following more than a month of gruelling negotiations, the leader of the pro-business FDP, Christian Lindner, walked out of talks overnight, saying there was no "basis of trust" to forge a government with Merkel's conservative alliance CDU-CSU and ecologist Greens.

"It is better not to govern than to govern badly," he said, adding that the parties did not share "a common vision on modernising" Germany.

Voicing regret for the FDP's decision, Merkel vowed to steer Germany through the crisis.

"As chancellor... I will do everything to ensure that this country comes out well through this difficult time," she said.

News magazine Der Spiegel called the breakdown in negotiations a "catastrophe" for Merkel and said Germany, long seen as an island of stability in a turbulent West, was having its "Brexit moment, its Trump moment".

The euro fell following the news, although analysts said the longer-term implications for the currency were not yet clear.

The negotiations, which turned increasingly acrimonious, stumbled on a series of issues including immigration policy.

Merkel's liberal refugee policy that let in more than one million asylum seekers since 2015 had also pushed some voters to the far-right AfD, which captured 12.6 percent of the vote after an Islamophobic and anti-immigration campaign.

The parties also differed on environmental issues, with the ecologists wanting to phase out dirty coal and combustion-engine cars, while the conservatives and FDP emphasised the need to protect industry and jobs.

Party chiefs had initially set a deadline of 6:00 pm on Sunday, but that passed without a breakthrough -- after already blowing through a previous target on Thursday.

The Greens angrily deplored the collapse of talks, saying they had believed a deal could be done despite the differences and accusing the FDP of negotiating in bad faith.

Lindner, who had taken a harder line on refugees as the talks progressed, "opted for his kind of populist agitation instead of political responsibility", Greens Europe MP Reinhard Buetikofer tweeted.