Denmark's Liberals Party, which won an election last week with other centre-right parties but has been unable to form a government with them, will try to establish a minority cabinet alone, sources close to the coalition talks told Reuters.
Despite the victory of the centre-right bloc, the Liberals had their worst election in a quarter of a century and a government formed only by themselves would give them just 34 seats out of 179 in parliament.
They will be banking on support from other centre-right parties vote by vote in parliament, even though they have not managed to reach a compromise on a government programme.
This would leave Denmark in an unusual situation: Only one government, in 1973, had a smaller support base in parliament at 22 seats. That cabinet lasted 14 months.
Sources said the Danish People's Party (DF), right-wing in most aspects in its policies, had refused to back down on its demand that state spending be increased, especially on health care. That runs counter to the policies of the Liberals and others.
DF's other demands have included curbs on immigration and a referendum on whether Denmark should stay in the European Union. The once-fringe party has surged in recent years and became the second-largest party in parliament, the largest on the right.
A meeting of the centre-right bloc including Liberals leader Lars Lokke Rasmussen and DF leader Kristian Thulesen Dahl, will take place at 1630 GMT on Friday, with Rasmussen expected to say afterwards his party will go it alone, the sources said.
Were it not for DF's state spending demands, it is likely the bloc would have had an easier time agreeing a coalition.
But its insistence has thrown up other less conventional options such as DF combining forces with centre-left parties that support its spending plans, or the Liberals joining forces with the Social Democrats of acting Prime Minister Helle Thorning-Schmidt, to continue Denmark's pro-EU course.