Updated at 6:25 a.m. ET
German Chancellor Angela Merkel emerged without agreement from marathon talks on forming a new coalition government, raising the prospect of new elections.
Merkel met with German President Frank-Walter Steinmeier to inform him that she was unable to come to a deal after the pro-business Free Democratic Party (FDP) pulled out of talks.
According to Reuters: "The decision to meet [Steinmeier], who has the power to call a new election, signaled that Merkel would not seek a minority government with the Greens ..."
NPR's Soraya Sarhaddi Nelson, speaking to Morning Edition from Berlin, says fresh elections are "a definite possibility ... [but] it's problematic at best. There are a lot of procedural things that have to happen for that to go forward."
"It is a day of deep reflection on how to go forward in Germany," Merkel told reporters. "As chancellor, I will do everything to ensure that this country is well managed in the difficult weeks to come."
She said the parties had been close to consensus but that the Free Democrats "decided abruptly to pull out just before midnight Sunday - a move she said she respected, but found 'regrettable,'" according to the AP.
The future of Merkel's government has been in limbo since elections in September, when her Christian Democratic Union (CDU) lost significant support. She has been trying to forge an alliance between the CDU, Bavaria's Christian Social Union, the FDP and the Green Party.
Merkel, who has led Germany since 2005, is among the country's longest-serving chancellors and she has emerged as a global statesman and the European Union's strongest advocate. Concern that her government could collapse sent jitters through the markets, with the euro slipping against the U.S. dollar.
What's more, polls show that a new election is unlikely to create clarity but instead produce a parliament similar to the current one. That could mean more instability for one of the world's most important economies.
FDP leader Christian Lindner was quoted by The Guardian as saying that the four parties in discussions "have no common vision for modernization of the country or common basis of trust," adding that it "is better not to govern than to govern badly."
The Guardian writes: "In a month of talks, Merkel has often cut a passive figure as party representatives found themselves at loggerheads over issues such as the question of how many of the migrants who found their way to Germany in 2015 and 2016 would be allowed to be reunited with their families."
As NPR reported at the time of the election, which saw the right-wing nationalist Alternative for Germany (AfD) make significant gains, the migration issue "has changed the political atmosphere in Germany. During the campaign, Chancellor Merkel often faced right-wing protesters at her public appearances."
Simon Schuetz reported: "Looking at the composition of the AfD electorate, it's apparent that the party was very successful in mobilizing former non-voters. Almost 1.2 million AfD voters were previously non-voters, while the second-biggest group of AfD voters, more than 1 million strong, previously supported Merkel's party, the CDU. Even the Social Democrats lost about half a million voters to the AfD."
Esme Nicholson, reporting for NPR from Germany on Monday, notes: "Commentators warn that the right-wing populist Alternative for Germany would potentially profit from new elections."
The Associated Press writes:
"On migration, the Christian Social Union wanted an annual cap on refugees, while the Greens sought to allow more categories of recent migrants to bring their closest relatives to join them.
Merkel said that 'we thought we were on a path where we could have reached agreement,' when that the Free Democrats decided to pull out."