German Chancellor Angela Merkel has said she would rather take her centre-right alliance into a snap election than lead a minority government, as political uncertainty in Europe's top economy rises.

The leader of the Christian Democratic (CDU) party made the comments on Monday after high-stakes negotiations to form a coalition government broke down.

"I'm very sceptical," about the prospect of leading a minority government, Merkel told public broadcaster ZDF.

She added that Germany needs stable leadership "that does not need to seek a majority for every decision".

President's stark warning

The chancellor had entered three-way coalition talks after a general election in September failed to deliver a majority for any party.

The weeks-long discussions included Merkel's Christian Democratic political alliance (CDU/CSU), the Greens and the Free Democratic Party (FDP).

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But late on Sunday, the pro-business FDP withdrew from the negotiations, plunging Germany into uncertainty and sending the euro falling.

Speaking after the talks broke down, casting doubt on Merkel's fourth term in office, FDP leader Christian Lindner suggested his party could not offer any more compromises on issues such as clean energy and migration.

"We were conducting exploratory talks, not forming a government," he said.

"At the end, you decide whether trust has grown, whether there is a common vision. And it is exactly this common vision for the country that was missing."

Ahead of Merkel's statement, President Frank-Walter Steinmeier made it clear that he wants to avoid a new election, stressing that the country's political leaders needed to return to the negotiating table.

"In the election on September 24, the parties vied to take on responsibility of Germany," said Steinmeier, who has the power to call a fresh election.

"This responsibility, in accordance with the German constitution, cannot simply be given back to the electorate."

Political deadlock

In September's poll, Merkel's CDU/CSU secured 33 percent of the vote, down about nine percent compared with the previous election in 2013 and failing to form a single-party government.

The FDP gained 10.7 percent of the votes, and the Greens scored 8.4 percent.

Merkel's former partners, the Social Democrats (SPD) have consistently ruled out being part of another so-called grand coalition since scoring just 20.5 percent of the vote in September's vote.

"Based on the election result of September 24, we are not prepared to enter a grand coalition," said SPD leader Martin Schulz, adding that his party is "not afraid" of a new election.

"We think it's important that the citizens of our country, the sovereign voters, are able to evaluate the situation again."

German stability questioned

Josef Janning, head of the Berlin office of the European Council on Foreign Relations, warned that Europe's major power was faced with the prospect of being run by a timid government with little ability or desire to engage in bold policymaking at home or abroad.

"It is likely the next government will not necessarily be a stronger government because it has come about in a rather cumbersome and conflictual process, which doesn't make for a very energetic and ambitious government," he told Al Jazeera.

"It will rather be one that will try to pragmatically continue and muddle through, rather than shake up Europe with new ideas," he said.

Al Jazeera's Jamal Elshayyal, reporting from Germany's capital Berlin, said the coming days "will prove crucial not only in shaping Germany's immediate political future but also that of the European Union.

"Even if the country does avoid having to vote again and whatever shape the next government will take, the stability that German leadership once represented is now being brought into question".