Mike German interviewed on The Politics Show Wales by Aled ap Dafydd
A former leader of the Welsh Liberal Democrats says his party can strike a deal on coalition government, as key talks continue with the Conservatives.
However Mike German, who has twice been in Welsh assembly coalition talks, warns that each side must compromise.
As Tory and Lib Dem negotiators meet, Mr German said solutions can be found.
But senior Welsh Labour MP Paul Flynn predicted Lib Dems would fail to make a deal with anyone, and there will be a minority Conservative government.
While the Tories won the most election votes and MPs, they are short of a majority and are seeking support from the Lib Dems to form a government.
Mr German formed a coalition with Labour in the assembly between 2000 and 2003, and his party tried - but failed - to go into coalition with other parties after the 2007 election.
I think there's every chance that all these difficult issues will be ironed out in the most effective way
Mike German AM, Liberal Democrat
He told BBC Wales that "anything is possible" during such negotiations.
A key issue in the UK talks is likely to be Lib Dem demands for reform of the electoral system with proportional representation [PR].
Mr German recalled that during his party's ultimately failed attempt to enter coalition in the assembly in 2007, Tories had offered a referendum on PR for local council elections.
The Assembly Member for South Wales Central said: "We have one over-riding objective and that is to provide stable government for this country. And secondly to ensure that there is swift action to respond to the financial crisis."
Mr German told Good Morning Wales: "Stability is crucial - that's what the country wants and we also have to prove... that you can demonstrate that it can work," and said he agreed that "people who are looking for solutions will find solutions."
"I think there's every chance that all these difficult issues will be ironed out in the most effective way. And in the end if you want to reach a solution each side has to compromise and give in".
I'm desperately keen to see some sort of stable alliance that will enable us to deal with the financial position that we've been left with
Glyn Davies MP, Conservative
Mr German also told The Politics Show Wales he would be "very comfortable" if the Tories offered a referendum on electoral referendum.
Another former Welsh Lib Dem leader, Lembit Opik, who has just lost his Montgomeryshire seat, said electoral reform was his party's number one priority and did not believe a deal would be struck on Sunday.
"I think the Tories are going to have a real problem with putting the public interest first," said Mr Opik.
"I mean, that sounds a bit cynical but the Tories really have think about the fact that coalition politics will be here to stay if we do the right thing in terms of the public interest".
Glyn Davies, the new Conservative MP for Montgomeryshire, said: "We are responding to the realities of the situation. I'm desperately keen to see some sort of stable alliance that will enable us to deal with the financial position that we've been left with."
But Labour MP Mr Flynn forecast that the Lib Dems would not do a deal with either the Tories or his party.
"It collapsed in Wales [in 2007] because of internal problems within the Liberal Democratic party, it's unlikely to work with Labour and we are going to see the system we have in [the parliament in] Scotland with minority rule by the party that won the largest number of votes."
Plaid Cymru and their Scottish counterparts the SNP still hope they could play a role in a coalition.
If we stitched together some coalition... it would be very fragile... and the majority of the public would quite rightly say 'you guys lost the election - how dare you hang on to power'
Paul Flynn MP, Labour
They have nine seats between them and on Saturday said they were "willing to explore the potential of working with other parties to ensure the new UK government serves the best interest of both Scotland and Wales".
Jonathan Edwards, the new Plaid MP for Carmarthen East and Dinefwr, agreed that he would like Labour and the Lib Dems to strike a deal because they would then also look to his party.
But Mr Edwards accused Labour of "sectarian nonsense" by saying they would not do a deal with nationalist parties.
"I don't think the people of Wales are going to forget very easily and they won't forgive the Labour party for not exploring every opportunity to stop Tory rule," said Mr Edwards.
But that was rejected by Mr Flynn as "cynical politics at its worst".
"If we stitched together some coalition with all the odds and ends that are about, first of all it would be very fragile and wouldn't be firm government and the majority of the public would quite rightly say 'you guys lost the election - how dare you hang on to power'," said Mr Flynn.
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