Germany braces for poll as talks with political parties falter

Berlin - Chancellor Merkel in crisis as other parties play hardball

Efforts to form a three-way governing coalition in Germany collapsed on Monday, pitching Europe's biggest power into political crisis, and its president told parties they owed it to voters and European neighbours to form a government.
The major obstacle to a deal was immigration, according to Chancellor Angela Merkel, who was forced into negotiations after bleeding support in a September 24 election to the far right in a backlash at her 2015 decision to let in over one million migrants.
The failure of exploratory coalition talks involving her conservative bloc, the liberal pro-business Free Democrats (FDP) and environmentalist Greens raises the prospect of new elections and casts doubt over her future after 12 years in power. Merkel said later she prefers snap polls to leading a minority government.
Negotiations broke down after the FDP withdrew saying they had found insufficient common ground with her Christian Democratic/Christian Social Union bloc and the Greens.
President Walter Steinmeier said Germany was now facing the worst governing crisis in the 68-year history of its post-World War Two democracy. After meeting Merkel, he warned parties not to shirk their democratic duties - remarks seemingly targeted at the FDP and Social Democrats (SPD), who on Monday ruled out renewing their "grand coalition" with the conservatives.
"Inside our country, but also outside, in particular in our European neighbourhood, there would be concern and a lack of understanding if politicians in the biggest and economically strongest country (in Europe) did not live up to their responsibilities," he said in a statement.
Business leaders also called for a swift return to talks.
With German leadership seen as crucial for a European Union grappling with governance reform and Britain's impending exit, FDP leader Christian Lindner's announcement that he was pulling out spooked investors and sent the euro falling in the morning.
Both the euro and European shares recovered from early selling, while German bond yields steadied near 1-1/2 week lows, as confidence about the outlook for the eurozone economy helped investors brush off worries about the risk of Germany going to the polls again soon.
Steinmeier's intervention suggests he regards new elections - desired by half of Germany's voters according to a poll - as a last resort.