BAGHDAD - US Vice President Joe Biden was Sunday marking Independence Day with American troops in Iraq ahead of talks later in the day with the two men vying to lead the conflict-wracked nation`s next government.

Biden, on day two of his second trip to Baghdad this year, had on Saturday said he was "extremely optimistic" Iraq`s politicians could resolve their differences despite a four-month impasse since a deadlocked general election.

Accompanied on his visit by wife Jill, the vice president was greeting troops at a US military base near Baghdad ahead of meetings with national leaders, including Prime Minister Nuri al-Maliki.

Also on the agenda are talks with Iyad Allawi, a former prime minister who narrowly beat incumbent premier Maliki into second place in the March 7 parliamentary ballot that has yet to usher in a new government.

Allawi, a Shiite, insists as the election`s victor that he has the right to become prime minister, especially as his Iraqiya coalition had strong backing in Sunni-dominated provinces.

Maliki, however, who is fighting to hold on to his job, has so far managed to stymie Allawi`s chances by forming a Shiite super-party that with 159 seats is only four seats short of a majority in the new 325-seat Baghdad parliament.

The failure of either man to bow out to the other has alarmed Washington which is steadily reducing its military presence in the country seven years after the US-led invasion that ousted dictator Saddam Hussein from power.

Biden in remarks to reporters on Saturday expressed confidence that impasse can be resolved.

"I think the country is in the position where in one sense it looks the most difficult putting the government together, but in another sense this is local politics," he said.

"This is not a lot different than any other government," he said, adding that "the parties are all talking. I remain extremely optimistic about a government being formed here that will be representative."

Biden last visited Iraq in January when he came to try to defuse a political crisis after hundreds of candidates were barred from the poll in March over alleged links to now-executed dictator Saddam Hussein.

The United States has stepped up its diplomatic efforts in the past few weeks to help Iraq fill the prolonged power vacuum since the general election.

Last month, US Assistant Secretary of State for Near Eastern Affairs Jeffrey Feltman held talks with all of Iraq`s main political leaders in a bid to promote an inclusive deal.

There are currently 77,500 American soldiers in Iraq -- compared to 92,000 in Afghanistan -- but combat troops are due out by September 1, after which a training and advisory force of 50,000 will remain until December 2011.

A senior aide to Biden insisted that the troop withdrawal would go ahead as planned and would not be affected by the political hiatus in Baghdad.

BDST: 12:49 HRS, July 4, 2010