September 26, 2017 / 5:44 AM / 2 years ago

New Zealand party leaders meet with caucuses to start negotiation talks

WELLINGTON (Reuters) - New Zealand’s major party leaders met with their caucuses on Tuesday, preparing to kick off talks on forming the next government with a nationalist party that holds the balance of power after an inconclusive weekend election.

New Zealand First party Leader Winston Peters speaks during an event held ahead of the national election at the Te Papa Museum located in Wellington, New Zealand August 23, 2017. REUTERS/Ross Setford

The ruling National Party won the most seats in Saturday’s general election, but failed to secure enough to form a government, leaving the New Zealand First Party in the position of kingmaker.

Deputy leaders of both the ruling National and opposition Labour parties said they would be willing to give up the role of deputy prime minister to win the backing of Winston Peters, who leads New Zealand First.

But the Labour Party, whose support spiked after Jacinda Ardern became leader last month, also has a chance to govern in New Zealand’s proportional representation system, if it can woo Peters into a coalition along with the Green Party.

Ardern said she had “every chance” to become the country’s youngest prime minister in modern history, adding that her team had contacted that of Peters, a veteran politician who has served in National and Labour governments.

“We are willing and available when he is ready,” Ardern, 37, told reporters in Wellington. “I respect the time that Mr. Peters will need to talk with his party.”

Asked about possible sticking points in talks, she said budget responsibility rules would apply in any government Labour led.

Both National and Labour are expected to stick to fiscal prudence, but to differ on monetary policy, trade and immigration. Labour wants to cut immigration and renegotiate some trade deals that could hurt two key sources of growth.

It wants to add employment to the central bank’s inflation-targeting mandate, which could make monetary policy more stimulatory, and there is some concern about New Zealand First’s preference for more central bank intervention in the currency market.

The political uncertainty weighed on the New Zealand dollar , which was down 0.32 percent at $0.7243, after posting its biggest daily drop in more than four months on Monday.

Forming a coalition government could take weeks, Prime Minister Bill English has said, though he hoped talks would be constructive, even if expected to be tense.

English has courted Peters since election night, when he acknowledged his “strong performance”, saying voters had given him a role in the new government’s formation.

“He understands his role and the role here is, now that we’ve had an election where the people have spoken... then it’s up to the political party leaders to form the kind of government indicated by the election,” English told media.

The National Party secured 58 seats, ahead of the 52 won by the Green Party and Labour in Saturday’s election, leaving both still in need of NZ First’s nine seats to reach the tally of 61 required to form a government.

A final tally of election results is due on Oct. 7, when “special votes”, which constitute 15 percent of the total and include overseas votes, are released. English remains prime minister in the interim.

Reporting by Ana Nicolaci da Costa in Wellington and Jane Wardell in Sydney; Editing by Clarence Fernandez

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