Lib Dem assembly leader Mike German

The possibility of a 'rainbow coalition' ruling the Welsh assembly has been revived after the Liberal Democrats indicated they could still enter a three-way government with Plaid Cymru and the Conservatives.

The Welsh Lib Dems agreed at a meeting on Wednesday not to continue with joint-government talks, with leader Mike German saying "deep division" on the matter meant "it would not be possible to move forward to recommend this to a special conference".

But on Thursday Elgan Morgan, chairman of the party's conference committee, said that following requests from 20 members the meeting would go ahead on Saturday.

In May's assembly elections Labour maintained its position as the largest single party but without an overall majority.

Both Plaid and the Lib Dems dropped out of negotiations with Labour, which could try to form a minority administration, in favour of pursuing the three-party deal.

The three smaller parties did have enough seats to command a majority but were all split on working with each other.

A Plaid spokesman said: "It will be interesting to see what the Liberal Democrat members think of the inspiring coalition proposal document that their leaders failed to make a reality." 

If no agreement on who becomes first minister can be reached by next Wednesday, new elections will be held.