East Timor president sets Friday deadline for new govt

DILI, Aug 1 (Reuters) East Timor's president has set a Friday deadline for rival parties to agree on a new government as politicians asked for more time to break a political impasse.

East Timor installed a new parliament on Monday but political parties failed to end a deadlock over a new government and the appointment of a Prime Minister.

No party has a majority following parliamentary elections in June and rival groups have failed to reach an agreement on who should form a new government.

President Jose Ramos-Horta has said he would use his constitutional right to decide the composition of the new government if parties failed to do so.

Ramos-Horta said today he would announce a new government on Friday.

''I was asked by parties to give them more time to discuss in order to find an alternative and solution that can ensure peace and stability,'' Ramos-Horta told reporters.

''I'm not worried because the country is functioning....I can wait one or two days before I make my decision,'' he said.

The former ruling Fretilin party, which led East Timor's 24-year struggle against Indonesia, won 21 seats in the June poll, far short of the majority required to rule.

It says it has the right to govern because it won the most votes in the election.

The CNRT, a party founded this year by former president and independence hero Xanana Gusmao, won 18 seats. It has declared a coalition with other parties in a bid to set up a government.

Fretilin and the CNRT had previously ruled out Ramos-Horta's proposal to form a unity government.

Factional bloodshed broke out in East Timor last year, forcing tens of thousands of people to flee their homes.

The mayhem, during which 37 people were killed, was triggered by a government decision to sack 600 soldiers.

REUTERS RN VV1523