Welsh Labour leader Rhodri Morgan has said that it is unlikely Labour will reach a deal to form a coalition Welsh Assembly Government.
Rhodri Morgan had another long meeting with Labour AMs
Mr Morgan said talks would continue with the Lib Dems and Plaid Cymru to try to form a "sustainable and stable" minority Labour administration.
The statement followed a meeting of the assembly Labour group.
Liberal Democrat assembly group leader Mike German said it was too soon "to arrive at any conclusions".
The rules state a new administration has to be formed within 28 days of the assembly election, which took place on 3 May.
Mr Morgan said that he hoped to reach an agreement to form a Labour minority government "but with stability, not merely a government that is office and not in power".
He added that the next few days would "be crucial" as he entered into full blown negotiations on any possible "pact" with either Plaid Cymru or the Liberal Democrats.
The rival parties could be given policy concessions in return for supporting Labour in key votes, such as no confidence motions.
Mr Morgan told reporters that his party "recognises that we now live in a pluralistic world".
"What that means is really that we hope to be in a position to form a minority administration but one that has to be supported in order to have some kind of stability and sustainability," he said.
"I don't think a coalition is probably the lead option at the moment - stability pacts rather than coalition.
Mr Morgan added that coalitions "seemed to be ruling themselves out as a result of the discussions we have had so far".
Liberal Democrat assembly group leader Mike German responded to the statement by saying that it was too soon to reach a judgement on the situation.
He said: "I'm still continuing my discussions with all parties, as we promised the people of Wales we would if no party won an overall majority. It's not sensible to arrive at any conclusions at this time.
"I remain of the belief that the government of Wales should have stability and a clear programme for government."
Plaid Cymru said Rhodri Morgan's comments were "hardly surprising news".
A Plaid spokesman said: "It was always unlikely that the Liberal Democrats would secure a coalition with Labour.
"A number of arrangements are still possible and we are still talking to all the parties. So far as we're concerned nothing has changed."