"I believe that after a second round of talks, I will be able to present a Cabinet list to the president for approval next week," Mr Erez said.

"I am very hopeful. I am more hopeful today (Tuesday) than yesterday," he added.

The BBC's Jenifer Jensen: "Turkey has had a history of politcal stability"

His meetings on Monday included talks with the pro-Islamist Virtue Party - the largest party in parliament - which had been excluded from earlier coalition talks by the previous prime minister designate, Bulent Ecevit, who heads the Democratic Left party.

Mr Erez - an independent deputy - was given the job after Mr Ecevit failed to draw up a government.

The Virtue Party has not granted immediate support for Mr Erez, but did not turn him down outright.

The BBC correspondent in Ankara says Mr Erez needs to offer the Virtue Party enough to persuade them to join a coalition, while trying not to upset Turkey's powerful pro-secular military, which still distrusts the pro-Islamists.

Tansu Ciller: 'categorical no'

The conservative True Path Party (DYP), led by former prime minister Tansu Ciller, however, rejected any co-operation with Mr Erez.

Tansu Ciller - refuses to join an Erez government

"Mrs Ciller has categorically refused to join the new government I am trying to form and has urged me to abandon my efforts," Mr Erez said after a short meeting with Mrs Ciller.

"I wanted the DYP to join the next government coalition, but I see that it's not possible."

Mrs Ciller and Mr Erez have had bad relations in the past. Although elected to parliament as a DYP candidate in 1995, Mr Erez quit the party in 1997 after feuding with Mrs Ciller. Correspondents say the former premier has been hostile to Mr Erez's coalition efforts from the start, as she was though to have wanted the job again for herself.

Chances of success

Correspondents say, however, that Mrs Ciller's refusal is not likely to prevent the formation of a new government, if Mr Erez obtains the support of the other main parties. The DYP holds only 99 seats in the 550-seat parliament.

Outoing premier Mesut Yilmaz has already pledged the backing of his right-leaning Monday Motherland Party, which has 136 seats, while Mr Ecevit also promised the support of his Democratic Left party, which has 61 seats.

It is more than a month since outgoing Prime Minister Mesut Yilmaz lost a parliamentary vote of confidence over allegations of links to crime organisations, and Mr Erez is already the second prime minister designate to try to form a government.

Government of 'national unity'

Speaking before the coalition talks began, Mr Erez said that he believed he was "up to the challenge" of forming a new government and solving the political impasse in the country.

He said he was aiming to build a broad-based coalition to take Turkey to its general election in April 1999, taking place almost two years ahead of schedule.

"I am not looking for a simple coalition but a government of national unity with the participation of all the groups present in parliament," he said.

Mr Erez is seeking to form the 56th government in the 75-year history of the Turkish republic, and the fourth since elections in 1995.