Sources within the Christian Social Union (CSU) told Reuters that influential leader Edmund Stoiber had decided against coming to Berlin as economy minister following Social Democrat (SPD) leader Franz Muentefering's Monday decision to step aside.
Without Stoiber and Muentefering, who was slated to take on the pivotal dual roles of labour minister and vice chancellor in the new coalition, chancellor-designate Angela Merkel could struggle to keep talks between the two camps on track.
"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 an ally of Merkel, said on German radio.
Gernot Erler, the deputy head of the SPD in parliament, said his party would have to take a new look at the talks after Muentefering's shock decision.
Other leaders were more optimistic, with Christian Democrat (CDU) general secretary Volker Kauder saying he believed a so-called "grand coalition" between the parties would happen.
But reflecting the panic in both camps, the parliamentary groups of Merkel's conservatives and the SPD called special crisis meetings on Wednesday and Thursday, respectively, to discuss the future of the talks and take personnel decisions.