The Turkish prime minister-designate, Mr Bulent Ecevit, said yesterday there were no important differences of opinion between his party and the far-right Nationalist Action Party (MHP) on the formation of a new government.
"We don't have crucial differences of opinion on these subjects," Mr Ecevit told a news conference after coalition talks with the MHP leader, Mr Devlet Bahceli, which resumed after stalling in a row over the nationalists' violent past.
The impasse between the two parties had unnerved Turkish markets, with Istanbul shares closing almost 3 per cent lower before the talks amid concern that the stalemate would drag on.
Mr Ecevit's Democratic Left Party emerged first and Mr Bahceli's MHP second in elections on April 18th, and were widely expected to forge a coalition with the help of a conservative party.
Markets have looked to a coalition between the two as essential to securing the passage of economic reforms sought by the International Monetary Fund through a fractious parliament.
Turkey has been plagued by political instability, with four governments since the previous elections at the end of 1995.
Greece said yesterday it had banned Turkish fighter aircraft, bound for Germany to be used in NATO air strikes against Yugoslavia, from passing through its airspace.
Greece, which opposes the bombing and has longstanding tensions with fellow NATO-member Turkey, has allowed Turkish military aircraft to use its airspace recently for humanitarian missions bringing aid to refugees from Kosovo.