Angela Merkel's government suffered a humiliating defeat to the opposition Social Democrats and Greens in key city state elections in Berlin last night as divisions within her coalition over the Greek debt and the future of the euro deepened further.

The German Chancellor's liberal Free Democrat (FDP) coalition partners took only 2 per cent of the vote in the Berlin poll and were ousted from the city's parliament. Her own conservative Christian Democrats (CDU) fared better, capturing 23 per cent.