Differences remain between conservative GERB and left-wing ABV and the latter will not take part in the government, ABV's Ivaylo Kalfin said Thursday.
Speaking to journalists after a second round of negotiations between the two parties, Kalfin however added his party would throw its support behind certain policies offered by the center-right party of Boyko Borisov.
In the joint statement of GERB and ABV after their closed-door talks the two parties underscored their agreement "in principle" on policies in areas such as the judiciary and security.
Kalfin, on the other hand, reiterated his party's proposal that a grand coalition be formed with the participation of Citizens for European Development of Bulgaria (GERB) and the Bulgarian Socialist Party (BSP).
GERB and ABV failed to agree on taxation and budget, with conservatives insisting the current tax legislation should remain untouched, while the left-wing party supports the introduction of the progressive tax system.
Negotiations are to be held with the nationalist coalition called Patriotic Front later on Thursday.
Two more parties, the BSP and the right-wing Reformist Bloc, were picked by GERB for the second round of consultations to form a government.
Reformists supprisingly met GERB's leader Borisov at his party's headquarters on Tuesday, while no specific date has been set for talks with socialists.
GERB has often described the right-wing coalition as its "most natural" partner.
The conservatives, who won October 5's snap poll, are expected to be handed out a mandate to from a government after Parliament is convened next Monday.
A total of eight parties made it into the National Assembly after the vote, with many experts and political leaders themselves predicting long and difficult negotiations.