"I am very skeptical and I believe that new elections would be the better path", she said.
But after four weeks of negotiations, FDP leader Christian Lindner walked out of the discussions, saying there was no "basis of trust" to forge a government with Mrs Merkel's conservative bloc and the Greens.
President Frank-Walter Steinmeier, who would have to decide on those options, said he will meet the various parties this week and urged them to rethink. If there is no agreement, Merkel can form a minority government or the president could call a new election.
Either way, the setback has raised concerns about the political stability of Europe's largest economy.
Mr Altmaier said: "We stand by our responsibility to ensure this country has a stable and reliable government".
It is likely to be a while before the situation is resolved.
Border agent injured in Texas dies
Mr Trump said the second officer injured on Sunday was "brutally beaten and badly, badly hurt", but "looks like he'll make it". Trump said, "We will seek out and bring to justice those responsible", and reiterated his call for a border wall with Mexico.
Justice League opens at $96 million domestically
That places the new Marvel movie somewhere between the two Guardians of the Galaxy in terms of global box office. And yes, that's possible, but there are a few factors that point to a lack of longevity at the box office here.