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Angela Merkel was pitched into the worst crisis of her career after talks on forming a new coalition government broke down, plunging both Germany and Europe into a new era of uncertainty and raising questions about the chancellor’s political future.

A system long admired for its stability now moves into uncharted constitutional territory, with even seasoned political observers unsure how a functioning government will be formed.

Ms Merkel sought to reassure the nation on Monday, saying she would do “everything to ensure the country is governed well through these difficult weeks”.

The uncertainty in Germany could not have come at a worse time for Europe, which is seeking German leadership as never before. The EU faces difficult talks on Brexit and is looking to Berlin for a German response to Emmanuel Macron’s proposals for reform of the EU and the eurozone.

Ms Merkel’s options are limited. She can try to form a coalition with the left-of-centre Social Democrats or to rule in a minority government with either the liberal Free Democrats or the leftwing Greens. Both scenarios are seen as unlikely.

Instead, Germans could be moving towards fresh elections, barely eight weeks after they last went to the polls — a situation unprecedented in the country’s postwar history.

Ms Merkel was expected to meet the German president Frank-Walter Steinmeier on Monday to discuss the options. The former foreign minister is expected to play a central role in the constitutional wranglings that lie ahead as Germany seeks a way out of the impasse.

Meanwhile, the economic effects of the crisis are already being felt. The euro fell 0.4 per cent to $1.1746 on Monday morning, while business leaders lined up to warn of the dangers of the country’s new period of instability. Some hoped a Jamaica coalition — so called because the colours of the four parties involved in talks matched those of the Caribbean nation’s flag — was still salvageable.

“We call on CDU/CSU, FDP and Greens to fulfil their political responsibility,” said Dieter Kempf, head of the BDI business lobby. “All parties must be prepared to make compromises for the sake of growth, prosperity and employment.”

SPD leader Martin Schulz, who ruled out forming a “grand coalition” with Ms Merkel’s conservative bloc immediately after the election, is also likely to come under intense pressure to show more flexibility.

But the party remained steadfast on Monday. “The starting point for the SPD hasn’t changed,” said Ralf Stegner, a senior SPD politician. “We have no mandate for a renewed grand coalition.”

Talks on forming a coalition between Ms Merkel’s CDU, its Bavarian sister party the CSU, the FDP and Greens had started shortly after last September’s inconclusive elections, in which the CDU/CSU and SPD both fell to their worst results since 1949.

But after four weeks of often acrimonious debate, the parties failed to bridge their differences. Arguments continued to simmer over refugee policy, tax issues and what to do about climate change.

The FDP announced at midnight on Sunday that they had broken off talks. “It’s better not to govern than to govern in the wrong way,” said Christian Lindner, the party’s leader. He said many of the measures agreed in the negotiations were “damaging”.

“We would have been forced to give up our principles and everything we’ve been working for years,” he said.

The partners turned on each other on Monday morning; each side blamed each other for the breakdown of talks.

The Greens said it was the FDP’s fault: it had deceived the public” for four weeks, said Simone Peter, one of its leaders, and had been “irresponsible, unserious, calculating”.

The FDP blamed the conservatives and, in particular, Ms Merkel. Volker Wissing, a senior FDP figure, said the talks had been “chaotic”, and the chancellor “had completely misjudged the situation”. He said that after four weeks of talks there were still more than 200 points that the partners could not agree on.

The conservatives accused the FDP of political calculation. “I believe the FDP decided relatively early on Sunday not to go ahead with this coalition, and so I believe that it planned this,” said Thomas Kreuzer, a negotiator from the CSU.

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