The Netherlands was headed for early elections after coalition talks on a fiscal austerity package broke down on Saturday, Dutch Prime Minister Mark Rutte said.
Seven weeks of negotiations fell apart after the minority rightist coalition's far-right parliamentary ally walked out, saying it "could not live up to" European Union demands.
"I have to inform you today that the three parties have failed to come to common answers," a visibly upset Rutte told reporters in The Hague.
Elections now seemed likely, he added.
Rutte said he had phoned Queen Beatrix to inform her of the latest developments and would consult with his cabinet on Monday on how to proceed.
"I am going to make some suggestions to cabinet to take the necessary measures. It will all be in the interest of the Netherlands," he said, without elaborating.
Dutch Finance Minister Jan Kees de Jager cut short his attendance at an IMF meeting in Washington on Saturday after the talks folded, his spokeswoman said. He was expected back in The Hague on Sunday morning, she added.
De Jager said in a statement that the cabinet would pore over the package to be handed to Brussels, but he did not exclude the possibility that a deal with other Dutch political parties might still be on the cards.
"Obviously in order to get these measures implemented, we have to look for a majority in parliament," De Jager said adding, "these austerity measures are not because of Brussels or European rules, but to improve our own country."
The austerity package at the centre of the row included a slight raise in Value-Added Tax (VAT), a freeze on civil servants' wages and a cut in spending in both the health and development sectors, ANP news agency reported. It cited Stef Blok, the leader of the parliamentary group of Rutte's VVD party.
The idea was to cut 16 billion euros ($21 billion) off the budget.
A number of economists contacted by ANP suggested that the collapse of the talks and early elections could cost the Netherlands its triple A credit rating.
Revised data from the country's central planning bureau forecast last month that the 2013 public deficit would rise to 4.7 percent of domestic gross product under current conditions. But the EU deficit ceiling is 3.0 percent of GDP.
The figures were a blow to the government, which had insisted that countries in breach of European Union deficit rules had to be rigorous in correcting public finances.
In a separate press conference at the Dutch parliament, far-right leader Geert Wilders expressed regret that the talks had failed but insisted that the suggested cuts were unacceptable.
"It is a package that will damage economic growth in the coming years and that will allow unemployment to grow.
"It will severely effect the spending power of many people, especially pensioners.
"We cannot live up to the demands Brussels is putting on us. Money is being taken from the wallets of pensioners.
"That's not right, just because Brussels wants to take away the economy built up by the elderly," he said.
Wilders called for elections as soon as possible.
But Diederik Samson of the Labour Party (PvDA), the leader of the largest parliamentary opposition party, told NOS public television: "It means new elections in September or October, it will not be before the summer."
Rutte's pro-business Party for Freedom and Democracy (VVD) is in coalition with the Christian Democrats (CDA).
It had also received the backing of Wilders' PVV, which until last month had given it a 76 seats out of 150 in the lower house. But that one-seat majority evaporated when a PVV deputy decided to become an independent.
That prompted the Dutch prime minister to solicit support from another small minority Christian party (SGP) which has two seats in parliament.
But with Wilders' withdrawal of his support from the government meant that those talks became academic on Saturday.
Rutte's government was sworn in in October 2010 following the fall of the then prime minister Jan Peter Balkenende in February that year in a dispute over continued military support to NATO forces in Afghanistan.