"I would not want to second guess this situation, but with Steinmeier being president, and the risk that any or all of the CDU, SPD and FDP take a hammering if fresh elections are held, it (a minority government) might be the compromise outcome", he said. Mr. Lindner rebuilt the Free Democrats from scratch after the party got so few votes in 2013 that it got kicked out of the Bundestag.
Merkel's liberal policy allowed some 1.2 million refugees to enter the country since 2015, which likely pushed some voters to the far-right AfD party. But it has refused to join her government again and reiterated that position on Monday despite mounting pressure for it to reconsider.
"I expect the parties to make the formation of a new government possible in the foreseeable future", Steinmeier said in a televised statement from Berlin.
It could be more than weeks.
The chancellor said she would do her best...
The European Commission in Brussels also sent out a message of reassurance. The rise of populism has complicated all this, and not only in mathematical terms.
"Those who seek political responsibility in elections must not shirk it if they hold it in their hands". And if that fails, Steinmeier would then propose a candidate who could be elected by a plurality of lawmakers.
The coalition's dissolution was a stunning thorn in Merkel's previously illustrious political career.
Outside of Germany, other European politicians voiced their concerns.
Earlier, the German Ministry of Finance reported that factory gate prices in the country advanced at a 2.7% clip year-on-year (consensus: 2.6%) last month.
Business leaders also called for a swift return to talks.
"I'm very skeptical", about leading a minority government, Merkel told public broadcaster ZDF.
"The parties have done Germany a disservice", he said.
A poll conducted by Welt online found that as much as 61.4 per cent of people surveyed said a collapse of talks would mean an end to Merkel as chancellor.
Europe's biggest economy faces snap elections or months of paralysis under a lame duck government after Merkel's efforts to marshal a ruling coalition failed despite more than a month of tough negotiations.
After slipping below ¥111.90, however, the dollar cut losses thanks to demand from real demand-backed traders for their settlement purposes, market sources said.
Meanwhile, an official at a foreign exchange margin trading service firm said that "traders refrained from buying the dollar for now due to uncertainties over U.S. tax reform".
Martin Schulz, the leader of her current coalition partner, the Social Democrats, reiterated Monday that his party was "not available" for a repeat, even without Merkel in charge, and that a minority government "is not practicable in Germany".
Others were said to be "consumed" by an election that will inevitably stall Brexit.
Merkel said her conservatives had left "nothing untried to find a solution".