East Timor's president Jose Ramos-Horta met Friday with political parties deadlocked over forming a government in the wake of elections last month and set a date for their first parliamentary session.

East Timor's president met Friday with political parties deadlocked over forming a government in the wake of elections last month and set a date for their first parliamentary session.

The ruling Fretilin party won 21 seats in the tiny nation's 65-seat parliament in June 30 elections, well short of the majority required to govern, but wants to continue in power.

Trailing in second place was a new movement set up by independence hero Xanana Gusmao that has allied with smaller parties and proposed to form a coalition government with 37 seats in parliament.

"Today was the first meeting that brought together Fretilin and the alliance, which is positive, and it was held in a positive atmosphere. This kind of dialogue has not happened before," President Jose Ramos-Horta told reporters.

"The conversation was friendly, so that is important, and we will continue this friendly atmosphere as we try to find a solution that is the best for the country," he said.

Fretilin has objected to Gusmao's proposed government, saying it should have the right to rule, and the constitution is unclear on the matter. The final decision now rests with Ramos-Horta, a Nobel peace laureate.

Fretilin's former prime minister Mari Alkatiri as well as Gusmao, sworn political rivals, attended the Friday talks.

No agreement was reached on the composition of the government but July 30 was set as a date for the first session of the parliament, Ramos-Horta added. The move effectively sets a deadline to resolve the stand-off.

The elections followed ongoing violence and political tension since bloodshed on the streets of the capital, Dili, in April and May last year.

The unrest left 37 people dead and forced 150,000 into camps. International peacekeepers were deployed to restore calm and along with some 1,700 UN police are still providing security in the half-island nation.

East Timor, once a Portuguese colony, gained independence in 2002 after a bloody separation from occupying Indonesia three years earlier.