The Hague: Netherlands was headed for early elections after coalition talks on a fiscal austerity package broke down, Dutch Prime Minister Mark Rutte said.

Seven weeks of negotiations fell apart on Saturday 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 inparliament," 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 rise in Value-Added Tax (VAT), a freeze on civil servants' wages and a cut in spending in 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.