Prime Minister Erna Solberg's government has until December 5th to find a majority in parliament with its centrist allies, the Christian Democrats and Liberals, to pass its 2017 finance bill.
A first blow came on Tuesday when the Liberal Party announced its withdrawal from the budget talks, unhappy with insufficient measures to stem climate change.
In its draft budget, the government has proposed to raise the price of diesel by 0.35 kroner (4 euro cents) per litre and that of petrol by 0.15 kroner per litre, while at the same time giving motorists other tax breaks.
Presented as non-negotiable, the proposal has fuelled anger among the Liberals.
On Wednesday, the Christian Democrats followed suit and said they “do not see the possibility of moving forward.”
“We are too far from each other” on a range of issues, said party leader Knut Arild Hareide.
Solberg, who heads a ruling coalition of the Conservative party and the populist Progress Party, said she would invite the leaders of the Liberals and Christian Democrats to a new meeting.
“I still believe that it is possible to find a budget solution which can give lower climate emissions, better competitivity for Norwegian companies, and provide better welfare to the Norwegian people,” she said.
Failing a last-minute compromise, the government could be forced to call a vote of confidence in parliament. A defeat would lead to negotiations to form a new government, potentially led by the Labour party currently in opposition.
The Norwegian constitution does not allow for early elections, with the next legislative vote scheduled for September 11, 2017.