The pro-business Free Democrats (FDP) withdrew from talks after more than four weeks of fruitless negotiations with Merkel’s conservative bloc and the environmentalist Greens, saying there was not enough common ground.

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.

A tired-looking Merkel said she would stay on as acting chancellor and consult President Frank-Walter Steinmeier on how to move forward. A deal had been within reach, she said.