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. Last Updated: 07/27/2016

German Conservative Steps Aside

BERLIN -- Efforts to form a new German government were plunged into crisis on Tuesday when a senior conservative abandoned plans to join the Cabinet and party leaders on both sides said coalition talks could collapse.

"We want to bring these negotiations to a successful conclusion, but one can't rule out that they will fail," Wolfgang Bosbach, the deputy conservative leader in parliament and a close ally of top Christian Democrat Angela Merkel, said on German radio.

Gernot Erler, the deputy head of the Social Democrats, or SPD, in parliament, said his party would have to take a new look at the talks to form a bipartisan government following SPD leader Franz Müntefering 's shock Monday decision to step aside. "After yesterday's events, the whole project of cooperating to form a government is under examination," Erler told Reuters television.

Adding to the sense of crisis, Bavarian premier and top conservative Edmund Stoiber announced Tuesday that he would not take up the post of economy minister in a coalition government.

Germany's conservatives and the SPD were forced into coalition talks after an inconclusive Sept. 18 election left them with few viable alternatives for a stable government. Those talks have now entered a crucial phase, with both camps under pressure to reach a consensus on policies before a self-imposed Nov. 12 deadline.

Müntefering , who was slated to become labor minister and vice chancellor in a coalition government, had been seen as a level-headed broker capable of holding together his own fractious party and forging consensus with the conservatives.

But he announced on Monday that he would step aside after party members voted down his candidate for the number two job, throwing the SPD into crisis and complicating the already formidable task of creating a bipartisan government.

Should the talks collapse, the big parties could explore other coalition possibilities with smaller parties like the Free Democrats or Greens. If those efforts were to fail, the country could face new elections.

The uncertainty weighed on German stocks, which underperformed other European bourses. With the future of Europe's largest economy hanging in the balance, economists said the euro currency was also at risk. "These developments are negative for the euro as fears that the new coalition will prove unstable are being confirmed," analysts at UBS said in a research note.

The SPD must now settle on a replacement for Müntefering and decide whether it wants to continue down the centrist course that he and outgoing Chancellor Gerhard Schrö:der steered -- all while conducting coalition talks with its longtime rivals.

Strains within the SPD were evident on Tuesday, with some members calling for a wholesale shakeup of the party leadership and others arguing for a delay in replacing Müntefering to ensure he continued to play a role.

The SPD will hold a leadership meeting on Wednesday and plans to choose a successor to Müntefering. Brandenburg and Rhineland-Palatinate premiers Matthias Platzek and Kurt Beck are seen as the favorites for the post.

On Tuesday, Christian Democrat party leaders were to hold a teleconference to discuss the future of their talks with the SPD.