Friday, May 7, 1999 Published at 17:30 GMT 18:30 UK
Dewar and Wallace weigh up options
Labour and the Lib-Dems are ready to share power in the parliament
The shape of the Scottish Parliament's first administration will begin to take shape this weekend as Labour and the Liberal Democrats thrash out their strategies for coalition.
With Scottish Labour failing to achieve the majority needed for overall control at Holyrood, both parties must consider the terms on which a pact can be agreed.
However, in a clear warning shot to Mr Dewar, Mr Wallace cautioned that Labour would be taking a risk if it sought to go it alone in the face of a sizeable Scottish National Party presence within the parliament.
Labour has 56 seats, nine short of the magical 65 needed for overall control.
The party won 53 seats in the first past the post constituency ballot and three in the regional list vote. The SNP was second on 35, winning seven constituencies but seeing the remainder of its 23 seats come via the regions. Liberal Democrats won 17, 12 in constituencies and the Tories 18 - all via the list.
The turnout averaged 58.7% - under the 60% achieved by the independence referendum in September 1997.
Jim Wallace said he would not begin negotiations on coalition on Friday but expected to do so in the next few days after consulting with his new MSP colleagues.
Speaking in Edinburgh, Mr Wallace said his party would stick to its plan to speak first to the largest single party but gave little away about which were his priority policies and cabinet ambitions.
For Mr Wallace, the new parliament means a new political reality for all parties.
He said: "We are all minorities now. I think the point is we are not negotiating today. This is a day to reflect on and celebrate our result.
"We always said we would stand by to talk to the party with the largest number of seats in the Scottish Parliament to see if it is possible to set up a programme of government.
Asked about tuition fees - which Liberal Democrats are committed to abolishing, posing a potential clash with Labour - he said: "Nothing has changed from what I said earlier this week."
Mr Wallace conceded that a minority government could be set up at Holyrood but said: "I happen to believe a hand to mouth approach where a government doesn't know if it's going to get its legislation through is not the best way to proceed."
Scottish Secretary and First Minister-in-waiting Donald Dewar said Labour was ready to get down to the business of governing in the Scottish Parliament.
Mr Dewar appeared before reporters at the Caledonian Hotel in Edinburgh to read a prepared statement but did not take questions.
The Scottish Labour leader said: No doubt you will be speculating about what happens next. I will tell you what I and the Scottish Labour Party are doing today.
He continued: "Progress over the next few days will, I hope, be rapid. In the spirit of the new parliament and the new politics we will let you know when decisions are taken.
As Mr Dewar left, he was asked if he had contacted Mr Wallace. Mr Dewar said: "I have not spoken to anyone yet."
Scottish National Party leader Alex Salmond said he suspected some Liberal Democrat supporters would be having "sleepless afternoons" over the prospect of their party cutting a deal with Labour.
He said: "Those of us who have campaigned in Scotland and seen the Labour Party in operation would feel somewhat sorry for the Liberals apparently going into the embrace, the deadly embrace of the Scottish Labour Party."
Looking ahead to his party's place as the main opposition at Holyrood, Mr Salmond said nationalists wanted to see the parliament succeed.
"A vital and inventive opposition is every bit as important for democracy as an administration."
Mr Salmond also said any criticism of the campaign as negative should also be laid at Labour's door.
He said: "I think people were disappointed in the campaign and I think that responsibility must go to the Millbank tendency who run the Labour Party, their campaign was unremittingly negative."
Scottish Tory leader David McLetchie, who endured a prolonged wait before being declared an MSP on the Lothian regional list, said his party had undergone a revival and shaken off memories of its wipe-out in Scotland in the 1997 General Election.
He said: "The Scottish Conservative and Unionist party is back. We are going to be the third force in Scottish politics.
"We are third with votes and third with seats. We are a major player, the Unionist opposition."