Without a deal, his party will not back the Socialist leader's bid to be confirmed as prime minister, Iglesias told La Sexta television. "We will abstain as we have done in the previous votes," he said.
Without a 'yes' vote by Podemos, Sanchez stands no chance to be confirmed as premier. If a government is not sworn in by Sept.23, there will be parliamentary elections on Nov.10.
The stalemate, lingering more than four months after an inconclusive election in April, highlights how tense and fragmented Spain's political landscape has become, and there is no guarantee that a new election would fix that.
"I believe that at the last moment we will come to an agreement, like in the game of basketball," Iglesias said, referring to Spain's world cup final qualification on Friday.
Iglesias reiterating his latest offer of a coalition government for a one-year trial period, which Sanchez rejected on Thursday.
"Our position is pro-stability ... we should be working until the last moment."
In July, parliament rejected twice Sanchez's confirmation bid, and this is his last opportunity to form a government.
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