Angela Merkel’s Christian Democratic Union (CDU), its Bavarian sister party the Christian Social Union (CSU), the pro-business FDP and the Green party have been holding coalition talks.
The country has been without a Government for almost two months after the general election on September 24 produced a hung parliament.
The FDP leader, Christian Lindner, said: “The four discussion partners have no common vision for modernisation of the country or common basis of trust.
“It is better not to govern than to govern badly.”
The collapse of the negotiations comes after the parties missed their deadline of 6pm on Sunday evening, one of several self-imposed deadlines to have been missed.
There are fears Mrs Merkel could face a snap election following the failure to form a new government with the support of the other parties.
Wolfgang Kubicki, FDP vice president, had earlier warned: “If we don’t work it out by 6pm on Sunday, the whole thing is dead.”
That deadline was then extended to midnight following the inability to agree on a deal, but the FDP’s walk out from the talks means no deal was reached.
More to follow…