(Reuters) - The two main contenders in Iraq's March election met on Tuesday for only the second time since the inconclusive vote as concerns mounted at the lack of progress in negotiations to form a government.
No deal was expected and none announced after the meeting between Prime Minister Nuri al-Maliki and former Prime Minister Iyad Allawi, whose Sunni-backed Iraqiya alliance took a slim two-seat lead in the March 7 vote over Maliki's bloc.
Neither won a working majority in parliament.
The prolonged political uncertainty has raised fears of a spike in violence. It could hamper needed economic reforms and threatens to thwart U.S. plans to end combat operations in August.
The talks came at a time when a Shi'ite-led alliance, consisting of Maliki's State of Law and the Iranian-backed Iraqi National Alliance (INA), is facing serious problems in deciding on a candidate for prime minister.
Some of Maliki's Shi'ite partners oppose his ambitions for a second term and his visit to Allawi fueled speculation that Maliki might pursue a deal with his rival instead.
Osama al-Nujaifi, a senior Iraqiya leader, said the meeting was a step toward serious negotiations between Iraqiya and State of Law. But he added that the meeting, which lasted more than an hour, did not address the thorny issue of the premiership.
"We have agreed that the related negotiation committees will meet to discuss all the issues and the possibilities for cooperation and forming an alliance," he said.
State of Law member Ali al-Dabbagh, who is also the government spokesman, said the aim was not to pursue a deal between State of Law and Iraqiya without the participation of others in the Shi'ite-led National Alliance.
"We didn't talk about specific posts but we talked about the importance of all parties taking part in the government."
Insurgents have sought to exploit the political vacuum since the election with bombings and assassinations, trying to reignite the sectarian violence that swept Iraq after the 2003 U.S.-led invasion and which peaked in 2006/07.
The longer it takes to agree on a coalition government the longer it will take to pass economic reforms needed for investment in sectors outside the oil industry, and for the economic development needed to make taking up arms less attractive to disgruntled Iraqis.
Further delays also threaten to thwart U.S. plans to end combat operations in August ahead of a full U.S. military withdrawal in 2011, especially if violence spikes.
U.S. Ambassador Chris Hill said the meeting between Maliki and Allawi was a positive sign.
"I think there is a sense that this is not going to go on forever," he told reporters. "It's hard to predict how this comes out but one thing that has remained very constant is that the ultimate solution here is going to have Kurds, Sunnis and Shi'ite. I see no change in that."