The coalition government has been hoping to quell growing dissent within its ranks over its position on the Armenia issue with a compromise statement to be proposed in the Bundestag (German parliament) on Friday to mark the centenary of the massacre.
The statement describes “the expulsion and extermination of over one million ethnic Armenians” as an “example of the type of mass extermination, ethnic cleansing, expulsion, and genocide, that characterised the 20th Century.”
But Steinbach called the statement "too inexact."
"It once again fails to describe the methodical expulsion and extermination of the Armenians as a genocide. These crimes are only described as 'an example' for the later crimes of the 20th Century."
Steinbach's party colleague Norbert Röttinger was also sharply critical of the government's position on Thursday.
“Something that for a long time has been recognised and academically acknowledged, must be called what it is: One hundred years ago there was a genocide inflicted upon the Armenians,” he said in an interview with the Tagesspiegel.
Steinbach went on to compare Foreign Minister Frank-Walter Steinmeier to Germany's first world war leadership due to the Foreign Ministry's ambivalent stance on the Armenian genocide.
"The Kaiser's government knew about the terrible atrocities and the extermination of the Armenians… …at the hands of the Young Turks," Steinbach said.
"Yet they stayed silent for the sake of their alliance. Similarly, the German government is staying vague on the issue for the sake of its Nato ally Turkey, the legal heir to the Ottoman empire."
During the First World War Germany fought on the same side as the Ottoman empire. German historians accuse the government of Kaiser Wilhelm II of complicity in the Armenian genocide which took place between 1915 and 1916 and in which an estimated 1.5 million people lost their lives.
While several other prominent EU states have recognised the massacres and expulsions of Armenians during the First World War as genocide, Germany has until now avoided using the term.
The Foreign Ministry, responding to a query from broadcaster ARD's Munich Report, recently said the term “is incompatible with the massacres and expulsions of 1915/16” because the convention on the prevention and punishment of the crime of genocide only came into effect in 1951 and does not apply to events prior to this date.
Critics suspect that this position has been adopted due to the political expediency of maintaining good relations with the Turkish government, arguing that such a definition necessarily also disqualifies the Holocaust from being considered genocide.
Turkey strongly rejects use of the term.
Ankara withdrew its ambassador from Vienna on Thursday after the Austrian Parliament voted earlier this week to describe the events as a genocide.