N-VA leader Bart De Wever told a news conference that a note presented on Monday by French-speaking socialist Elio Di Rupo, the man asked by the Belgian king to form a new government, did not provide a sound basis for successful negotiations.
It is not clear what will happen now. One possibility, increasingly mooted, is a fresh election, even though it would likely return the same parties with similar strength.
De Wever said he had initially been favourable towards the 111-page note from Di Rupo, including 22 billion euros of budgetary tightening by 2015 and greater fiscal autonomy for regions as the Flemish have demanded.
"Unfortunately after a thorough reading of the note, technical analysis by our staff and from external expertise, the N-VA has decided that the note was not a good basis to start negotiations," De Wever said.
All French-speaking parties and a number of Dutch-speaking parties had already agreed to restart coalition talks.
In theory they could press ahead with discussions, but they are reluctant to do so without the N-VA, the big winners in the June 2010 parliamentary election.
Flemish party leaders in particular fear excluding the party would fan separatist fervour in Dutch-speaking Flanders, delivering more electoral success to the N-VA at their expense.
The failure to form a new government and a public sector debt burden at about 96% of annual economic output have pushed up Belgium's borrowing costs.
The premium investors demand to hold 10-year Belgian debt over equivalent German bunds was around 1.2 percentage points on Thursday, well above pre-crisis levels.
Belgium came under fire in financial markets late last year when Standard & Poor's warned it might cut the country's AA+ credit rating, a negative outlook matched by Fitch in May.
Belgium's caretaker prime minister and finance minister met investors in London late last month, urging them to focus on Belgium's solid and growing economy instead of on the political stalemate.
EurActiv with Reuters
