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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. A failure from the political leader to form a new Government could launch a leadership challenge against Mrs Merkel. The country has been without a Government for almost two months after the general election on September 24 produced a hung parliament.

GETTY Coalition talks have failed, leaving Angela Merkel's political career on the brink

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 her failure to form a new Government with the support of the other parties.

German election: Photos from the election Mon, September 25, 2017 Latest pictures during the upcoming general elections in Germany Play slideshow REUTERS 1 of 22 Demonstrators scuffle with police during the protest against the anti-immigration party Alternative for Deutschland AfD, after German general election (Bundestagswahl) in Berlin

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. The crunch talks are widely seen as the biggest test of Mrs Merkel’s Chancellorship in her 12 years in office and failure to form a Government could mark the end of her political career. The DIHK Chambers of Industry and Commerce has warned that the uncertainty surrounding the future of German politics could have a negative impact on the economy. DIHK President Eric Schweitzer said: “"There is the danger that work on major issues for the future of our country will be delayed for a prolonged period of time.”

He continued: "German companies must now prepare for a possibly long period of uncertainty. “This is always difficult for the economy." Meanwhile, there have been warnings that the deadlock in Germany’s talks will have a knock-on effect on the EU. The EU's Budget Commissioner Guenther Oettinger has warned that the block will be “damaged” by Mrs Merkel’s inability to form a Government. He said a failure to reach a deal would "damage Europe and strengthen the region's populists" as the bloc waits for its economic powerhouse to form a government. Speaking to RT, Werner Patzelt, a political scientist and CDU party member, said that Europe will be stuck while German political parties continue to negotiate.

GETTY The FDP leader, Christian Lindner, has said there is no trust between the parties

GETTY There are fears Mrs Merkel could face a snap election following the failure to form a new government