Prime Minister Gordon Brown and his Conservative challenger David Cameron each made their case Friday for a coalition with the party that finished third in Britain's elections, hoping to secure the balance of power following an inconclusive vote.
The Conservatives, who won the largest number of seats in Thursday's contest, suggested that lawmakers from the third-place Liberal Democrats could serve as ministers in a future Tory government. But they held back from promising the far-reaching electoral reform the Liberal Democrats have demanded.
Brown, whose left-leaning Labour Party lost more than 90 seats is fighting to cling to power, promising to back the Liberal Democrats on reform and opening negotiations with Britain's smaller, Scottish and Welsh nationalist parties,
The jockeying — which could stretch on for days or even weeks — was taking its toll on markets. The FTSE-100 fell more than 87 points amid the continuing uncertainty over who will take charge of Britain's ballooning deficit.
Cameron told reporters a stable government was needed quickly to calm markets and said the Tories would promise to implement parts of Liberal Democratic election manifesto — but only offered the party, and their leader Nick Clegg, an inquiry to examine the issue of electoral reform.
"I want to make a big, open and comprehensive offer to the Liberal Democrats," Cameron said.
Brown went further in a similar public approach to the Liberal Democrats, saying he agreed with their demands.
"My view is clear — there needs to be immediate legislation on this to begin to restore the public trust in politics and to improve Parliament's standing and reputation, a fairer voting system is central," Brown said in comments clearly aimed at the third-place party.
Clegg did not immediately respond in public but said earlier that the party that had gained the most seats and the most votes — the Conservatives — should have "the first right to seek to govern."
Labour came second in Thursday's vote, which for the first time since the 1970s produced no outright winner. The Conservatives gained the largest number of seats but fell short of the parliamentary majority needed to govern alone.
With the results of all the country's contests declared, Conservatives earned 306 seats, Labour held 258 and the Liberal Democrats had 57. Other parties, such as the Scottish National Party and Welsh nationalists Plaid Cymru, held 28 seats.
As sitting prime minister, Brown would traditionally be given the first chance to put together a government. His left-of-center Labour Party is seen as a more natural coalition fit with the Liberal Democrats.
Many of the Conservative party's old guard distrust the Liberal Democrats' pro-European leanings and fiercely oppose its call for proportional representation, which would make it hard for any single party to hold power alone — effectively shutting out the Conservatives indefinitely.
"The Tories would fight it (electoral reform) tooth and nail," said Bill Jones, professor of politics at Liverpool Hope University. "It's like asking a turkey to vote for Christmas."
Labour is much more amenable to demands for electoral reform, but even a deal with the Liberal Democrats would leave them a few seats short of a majority, meaning they would have to turn to the Scottish and Welsh nationalists for further support.
Scottish National Party leader Alex Salmond, which held six seats, said he had already been invited to talks with Brown.
"Fate seems to have dealt us a mighty hand between ourselves and Plaid Cymru," Salmond told the BBC.
With the pound and the FTSE down, pressure mounted for a quick solution.
"A decision would have to be made very quickly," said Victoria Honeyman, a lecturer in politics at the University of Leeds,
She predicted that some sort of statement would have to be made before Monday when the markets reopen.
"There's a limit to how long can that this go on," she said. "The pound will start to crash."
Talks were expected to begin between political players Friday, aided by civil service guidelines detailing how the process should unfold.
Although Britain has no written constitution, senior civil servants have been preparing furiously to lay out the rules and avoid market-rattling uncertainty in the event of a so-called hung parliament, a result in which no party secures a majority. The last time a British election produced such a result was in 1974.
A period of political wrangling and confusion in one of the world's largest economies could unsettle global markets already reeling from the Greek debt crisis and fears of wider debt contagion in Europe. Britain's budget deficit is set to eclipse even that of Greece next year, and whoever winds up in power faces the daunting challenge of introducing big government spending cuts to slash the country's huge deficit.
Associated Press writers David Stringer, Paisley Dodds, Raphael G. Satter and Danica Kirka also contributed to this report.
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