"Germany will remain without a simple, transparent, unbureaucratic and all-encompassing environmental rule book," Environment Minister Sigmar Gabriel said in a statement. "The existing fragmentation will remain in place."

At present each of Germany's 16 states has its own set of regulations on issues such as pollution, making the approval process for firms planning new projects like roads or factories highly bureaucratic and complex.

In the 1980s it was decided to try and simplify the system and in 1997, then environment minister Angela Merkel -- now chancellor -- proposed a new, one-size-fits-all set of regulations to speed things up.

When Merkel's CDU/CSU conservatives and the centre-left Social Democrats formed the ruling "grand coalition" in 2005 it was something both parties promised they would make happen.

The government was also hoping that less red tape would help speed up the billions of euros (dollars) worth of infrastructure projects with which Berlin aims to pull Europe's biggest economy out of its worst post-war recession.

But with seven months to go before general elections -- when both parties aim to ditch the other and form a coalition with another party -- Gabriel on Sunday said agreement was impossible in the current legislative period.

Gabriel, who is from the SPD, said that with a lack of readiness to compromise the CDU/CSU -- which in turn blamed Gabriel -- was "damaging the economy and the environment at the same time."

The German branch of Friends of the Earth, BUND, said there was now a danger of a "race to the bottom" among German states to relax environmental regulations in order to attract investment.

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