Nauru's caretaker government has dissolved Parliament and called elections next Saturday - the second poll in less than two months.
Despite 14 sittings in the past seven weeks, Parliament has failed to elect officeholders since early elections in April.
Caretaker President Marcus Stephen says he's been advised that his government no longer has the legal means to pay its way.
He says the country cannot function without the legal authority for the government to fund essential needs.
Mr Stephen says the potential consequences for the economy, Nauru's social stability and its international standing could be severe and that is why he has announced new elections.
He has attacked the opposition for its lack of willingness to compromise, saying it has adopted an "all or nothing position" and has no intention of forming a coalition of any kind.