Serdar Denktash opposes the UN plan

One of the parties favours a UN-backed deal with the internationally-recognised Greek Cypriot government.

But the other is led by the son of the current Turkish Cypriot leader Rauf Denktash, who is cool towards the plan.

There is pressure on Turkish Cypriots to reach a deal with the Greek south before Cyprus joins the EU this year.

Correspondents say failure to reach a deal in time could affect Turkey's own chances of joining the EU in the near future.

Uneasy coalition

Elections in December split the parliament equally between parties supporting a UN plan for reunification of the island and others opposing it.

THE NEW PARLIAMENT Republican Turkish Party (pro-EU)- 19 National Unity Party (nationalist) - 18 Democrat Party (nationalist) - 7 Peace and Democracy Movement (pro-EU) - 6

Mehmet Ali Talat of the pro-EU Republican Turkish Party was asked to form a government after narrowly winning the largest number of seats.

Serdar Denktash, who leads the smaller of two nationalist groups, the Democrat Party (DP), had said he would join a coalition government if major changes were made to the plan.

Mr Denktash and Mr Talat said they would consult their parties before officially forming the government, in which they will control four and six ministries respectively.

The DP will receive the foreign affairs portfolio, giving it a key role in future negotiations with the Greek Cypriots.

The BBC's Tabitha Morgan in Nicosia says the result is a rather uneasy coalition.

While the pro-Europeans now share power, she says, they certainly do not have the majority they were hoping for to press swiftly ahead with re-unification.

But correspondents say it may be that the younger Mr Denktash represents the last hope for those who support the UN plan.

His father rejected it last March and still refuses to accept it as a basis for negotiation.