The German Government could barely conceal its fury after digesting the news of General Motor’s U-turn on its European division.

Its first reaction was to ask for its money back: the Germans had put up a bridging loan of up to €1.5 billion (£1.3 billion) to keep Opel plants afloat while a deal was hammered out.

On Tuesday night, while Angela Merkel was flying back from a trip to Washington, GM confirmed that it would pay back the money. But that was not enough to head off German anger.

After four months of negotiations, the German Chancellor boxed through a deal with Canada's Magna International, and its Russian partner Sberbank, to keep Opel plants alive in Germany. It was a trump card that won her crucial votes in September’s general elections, a sign to voters that she was ready to rustle up state aid to save German jobs.

Now that deal has fallen apart and Mrs Merkel — just back from a well-received speech to the US Congress — is not the only person to be wrong-footed. The Russian President, Vladimir Putin, who had hoped to modernise Russia’s car industry with Opel’s help, expressed his surprise.

German union leaders who had sold the Magna deal as a job saver were calling for massive demonstrations to be staged tomorrow. Opel workers earlier this week had agreed to go without a wage increase this year to help the Magna deal along; now they feel they have been betrayed and are in surly mood.

The newly minted Economics Minister, Rainer Brüderle, called the General Motors shift “unacceptable”. It was understood that GM would require €3 billion of state support to carry out radical restructuring of its European division. Mr Brüderle declared though: ”We won’t let ourselves be pressured by General Motors.”

And German regional premiers where Opel’s four factories are based were livid. None more so than Jürgen Rüttgers, premier of North Rhine Westphalia, who faces elections early next year.

The Bochum Opel plant, saved under the Magna plan, is in his region and could well be axed by General Motors.

“This shows the ugly face of turbo-capitalism,” said Mr Rüttgers, who in spite of his rhetoric is a conservative ally of Mrs Merkel.

The official word out of the cabinet was that the Government “regretted” the decision.

“A process of securing an investor, a process that spread over six intensive months, involving all players including GM, has been broken off,” said Ulrich Wilhem, the government spokesman.

The Magna and Sberbank deal was supported, he said, by “a convincing industrial logic". The collapse of the Magna deal is fast becoming the first political test of the new Merkel government of Christian Democrats and Free Democrats. Many Free Democrats and even Mrs Merkel’s conservative Economics Minister before the election argued in favour of Opel going into insolvency.

Mrs Merkel ignored the Free Democrats and over-ruled her Economics Minister, then Karl-Theodor zu Guttenberg. She even dismissed the reservations voiced by two government representatives on the Opel trust board. The deal with Magna was duly struck before the general election.

It was hailed as a triumph of her negotiating skills and her command of the German-Russian relationship. When it was finalised she told the voters that it was the result of her government’s “patience, determination and clarity”. But Ms Merkel had not covered all the bases.

With British and Spanish workers feeling that they had been stitched up by the Germans, the Magna deal was submitted to the European Commission to determine whether EU competition rules had been violated. That bought General Motors time to re-think its position.

Good sales figures and a fear that Opel-GM technology could end up in Russian hands, creating a new European competitor, persuaded GM to change its position. Ferdinand Düdenhofer, a car industry expert, warned today that GM might just declare Opel insolvent — and the Government will have wasted months of bargaining.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax