Britain's two biggest opposition parties resumed talks on Monday to reach a deal to govern after an inconclusive election last week that has left markets looking for a swift resolution to political deadlock.David Cameron's centre-right Conservatives and the smaller Liberal Democrats will attempt to thrash out a deal that could lead to Britain's first collaborative government since the 1970s.The talks will centre on the best way to rebuild the economy after the worst recession since World War Two and cut a record budget deficit.Gordon Brown, whose Labour Party has ruled Britain since 1997, remains prime minister while the negotiations continue and still hopes he can woo the Lib Dems and hold on to power.The Conservatives won the most seats in the election, but fell 20 seats short of a majority in the 650-member parliament. They want the support of Nick Clegg's third-placed Lib Dems, possibly in a formal coalition or a looser power-sharing deal.The two sides have limited time to reach an agreement because financial markets, already worried by a Greek financial crisis, want quick political agreement."I don't think a period of prolonged uncertainty is a good thing," Clegg told reporters. "That's why we want to arrive at a decision as soon as possible."The two sides disagree on electoral reform, immigration and Britain's ties with the European Union. However, Conservative foreign affairs spokesman William Hague, a former party leader who heads its negotiation team, said the talks were going well."We are meeting now to discuss some specific ideas and proposals," he said. "We are optimistic about making further progress very soon."CLOCK TICKINGAnalysts said a European Union and International Monetary Fund rescue package to prevent a debt crisis from spreading had overshadowed Britain's political uncertainty and bought the party leaders some time."Even so, the market's patience over the UK political situation will only last for a limited time," said Howard Archer, chief UK economist at IHS Global Insight.Any breakdown of talks between the Conservatives and the Lib Dems would delay the formation of a new government and raise the possibility of a wider, and possibly more unstable, pact between the Lib Dems, Labour and a host of smaller parties."There would be serious doubts about its ability to take tough further fiscal action," Archer said. By 0918 GMT, the FTSE 100 index of leading shares was 4.5 percent higher.Analysts said markets would take solace from comments by the Conservatives and Lib Dems that reducing a deficit running at more than 11 percent of national output would be a plank of any deal.Brown, whose Labour came a distant second in the election, remains in office in a caretaker role. He stands ready to try for an alliance with the centre-left Lib Dems if they are unable to agree with the Conservatives.Clegg appeared to be keeping his options open, with news emerging that while the Conservative-Lib Dem talks were going on, he met in secret with Brown at a nearby location.A stumbling block to a Conservative/Lib Dem deal could be electoral reform, a long-cherished ambition of the Lib Dems who would win far more seats if Britain switched from its winner-takes-all system to proportional representation.For multimedia coverage, click http://r.reuters.com/quq44jFor a graphic of gilt and stg reaction, click http://r.reuters.com/nec23kFor a graphic of results, click http://r.reuters.com/hym23k- See us online http://uk.reuters.com/news/globalcoverage/politics- Follow us on Twitter https://twitter.com/reuters_co_uk(Additional reporting by Peter Griffiths; Editing by Charles Dick)News posted by www.newsinfoline.com
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