Senior party leaders from Britain's Conservatives and Liberal Democrats were scrambling to hammer out a new government Sunday, following an election that failed to produce a clear winner.
Negotiating teams from both parties met for power-sharing talks at central London's Cabinet Office. Leaders from both sides said talks so far were "constructive and respectful," but they're also keenly aware that a deal must be brokered soon — market jitters over Britain's economic stability are putting increased pressure on the parties to make an announcement before trading begins Monday.
David Cameron's right-of-center Conservatives won 306 of the 650 seats in the House of Commons in the national election Thursday, but they need 20 more to gain a majority. They are hoping to reach a deal with the center-left Liberal Democrats, whose 57 legislators could give them a comfortable cushion for passing legislation.
But to form a coalition or strike a deal to enable a minority Conservative government, the two parties must compromise on crucial differences over electoral reform and foreign policy.
"We're very conscious of the need to provide the country with a new stable and legitimate government as soon as possible," Conservative foreign affairs spokesman William Hague told reporters before disappearing into the Cabinet Office for negotiations with senior Liberal Democrats.
Nonetheless, Cameron stressed that he won't rush into agreement, and his party had indicated that talks would stretch on at least throughout Sunday.
Liberal Democrat leader Nick Clegg gave little away on whether a deal was likely, but said his party was focusing on sweeping voting reform — a key sticking point in the talks.
The Lib Dems are demanding an overhaul to a voting system that rewards the party that claims the most first-place finishes in individual districts, as in U.S. Congressional elections. Thanks to that system, the party only gained 9 percent of the seats in the House of Commons despite winning 23 percent of the popular vote.
Clegg wants a system common in continental Europe in which parties win seats in proportion to their share of the total vote — a system that is much less likely to put one party in a dominant position. The Conservatives fear such reforms would leave the Liberal Democrats holding the balance of power indefinitely.
Senior Liberal Democrats warned that Cameron's party was not giving enough ground on political reform, presenting "a mountain to climb" before a deal can be reached.
"I don't believe that anybody can now establish a new government who is deaf to the calls from the British people for reform to our political system, and part of that is electoral reform," former Lib Dem leader Paddy Ashdown told the BBC.
Prime Minister Gordon Brown — whose Labour Party suffered a significant defeat in the election — has offered to negotiate an alternative coalition with Clegg if talks between the Liberal Democrats and Conservatives collapse.
Still hoping that his unpopular party can cling to power, Brown offered to legislate for a referendum on a change in the voting system. That's a step further than Cameron's offer to the Lib Dems of a "committee of inquiry" into the issue, which wouldn't necessarily lead to any change.
Aside from political reform, Cameron and Clegg have to compromise on other major disagreements, including their positions toward Europe. Clegg's party is in favor of Britain eventually joining the euro currency, a policy Cameron's bloc bitterly opposes.
The Observer newspaper reported Sunday that it obtained a secret Conservative Party document drafted by Hague that outlined a hardline, anti-Europe strategy once it comes into power, but a spokeswoman said no one in the party had knowledge of it.
The potential partners are, however, likely to find common ground on the economy and taxes. Both agree on the need for spending cuts, although Cameron wants a more severe pace of austerity measures. The two also have similar policies on cutting taxes for the lowest-paid British workers. Both have pledged action on civil liberties and would likely take quick action to scrap Britain's planned national identity card program.
They are both committed to keeping British troops in Afghanistan, at least in the short term. Clegg's party describes itself as a "critical supporter" of the conflict, while Cameron has pledged a withdrawal of British forces within five years.
Both have signaled they may take a more skeptical tone in relations to the White House — Cameron previously attacked as "slavish" the links Tony Blair and Brown have shared with Washington.
Meanwhile, Brown remains in power — and will continue to reside in his Downing Street office until it becomes clear that Cameron can form a new government. In an e-mail to Labour activists, Brown said he was resolved to continue his duties as Prime Minister amid the political uncertainty.
Thursday's closely fought election was the first since 1974 to produce a "hung Parliament," in which no party was able to take overall control. The prospect of days of political horse-trading stoked anxiety in financial markets already unsettled by the Greek debt crisis, dragging the FTSE 100 share index 2.6 percent lower Friday.
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