UK parties have ‘mountain to climb’ for power pact

The divide could offer an opening for Prime Minister Gordon Brown’s Labor Party to stay in power through a coalition with the Liberal Democrats and some smaller parties.

Liberal Democrat leader Nick Clegg met with Conservative leader David Cameron last night, after meeting with Brown during the afternoon for what a Liberal Democrat party spokesman said was an “amicable discussion.’’

A deal must be brokered soon to calm financial market anxieties about Britain’s economic stability.

“We’re very conscious of the need to provide the country with a new stable and legitimate government as soon as possible,’’ William Hague, Conservative foreign affairs spokesman, told reporters before disappearing into London’s Cabinet Office for negotiations with senior Liberal Democrats.

After six hours of negotiations, Hague emerged to announce that the two parties agreed that they should focus on economic stability and reducing the ballooning budget deficit. More talks were planned for today, he said.

The prospect of days of political horse-trading has fueled anxiety in financial markets already unsettled by the Greek debt crisis.

Fears that an unstable government could delay Britain’s ability to tackle a record deficit dragged the FTSE 100 share index 2.6 percent lower Friday, while the British pound was sharply down.

“With the markets being highly nervous and fragile in the wake of the Greek crisis and in the mood to penalize any country that is perceived to be falling short on its deficit reduction needs, it is of paramount importance that a credible commitment on how to tackle the dire UK public finances is in place sooner rather than later,’’ said Howard Archer, chief UK and European economist at IHS Global Insight.

Cameron’s right-of-center Conservatives won 306 of the 650 seats in the House of Commons in Thursday’s national election but fell 20 votes short of a majority. For the first time since 1974, voting resulted in a “hung Parliament’’ — no party is able to take overall control of the country.