The federal Coalition is dead, with Nationals leader David Littleproud on Thursday morning declaring it “untenable” after Liberal leader Sussan Ley stared down the Liberals’ minor partner.

This followed all Nationals frontbenchers resigning from the shadow ministry on Wednesday night, in protest at Ley’s retaliation against three Nationals senators, Bridget McKenzie, Ross Cadell and Susan McDonald, breaking shadow cabinet solidarity.

“We can not be part of a shadow ministry under Sussan Ley”, Littleproud told a news conference early Thursday.

“No one in our ministry could work in a Sussan Ley ministry.”

This leaves the Liberals alone as the opposition, with the Nationals as a crossbench party with no role in the official opposition.

Littleproud said the parties would be “two different armies” going forward for “the time being”.

The crisis dramatically increases the threat to Ley’s leadership, which was already unstable and not expected to last. Although Littleproud would not acknowledge it, the Nationals are encouraging a change in the Liberal leadership.

Most immediately, Ley will have to reshuffle her frontbench with Liberal members only.

Littleproud said the “sovereign position of the National party had been disrespected” and the three senators had been “courageous”.

“We were not going to stand by and have three of our senators be made scapegoats. We were going to stand with them because they did the right thing.”

The senators voted against the government’s hate crimes legislation, which passed with Liberal support. Their action was in accord with the Nationals’ decision to oppose the legislation. The Nationals disagreed in particular with the bill’s provision to enable the banning of hate-spruiking organisations. The party argued it was too wide and would endanger free speech.

Ley insisted there had been a shadow cabinet decision to obtain changes to the bill and then support it. Littleproud said a final decision on the legislation had not been made by the shadow cabinet or the joint parties.

Littleproud accused Ley of mismanaging the situation.

He stressed he had warned Ley of the consequences if she accepted the three senators’ resignations.

He spoke to her again early Thursday morning before announcing the decision. She held to her position.

This is the second break in the Coalition since the election.