European stocks slipped and safe haven government bonds were in demand early on Monday as the collapse of coalition talks in Germany served as a reminder of political risk that still runs as an undercurrent in Europe.
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BERLIN – Germany faced an uncertain political future on Monday after the collapse of weeks of talks on forming a new government, with Chancellor Angela Merkel set to consult the country’s president and the possibility of new elections looming.
Germany’s Sept. 24 election produced an awkward result that left Merkel’s two-party conservative bloc seeking a coalition with the pro-business Free Democrats and the traditionally left-leaning Greens. The combination of ideologically disparate parties hadn’t been tried before in a national government, and came to nothing when the Free Democrats walked out of talks Sunday night.
Merkel said her conservatives had left “nothing untried to find a solution.” She said that she “will do everything to ensure that this country is well-led through these difficult weeks.”
It’s likely to be a while before the situation is resolved. The only other politically plausible combination with a parliamentary majority is a repeat of Merkel’s outgoing coalition with the center-left Social Democrats — but they have insisted time and again that they will go into opposition after a disastrous election result.
If they stick to that insistence, that leaves a minority government — not previously tried in post-World War II Germany — or new elections as the only options. President Frank-Walter Steinmeier will ultimately have to make that decision, since the German…