By Inti Landauro and Charlie Devereux

MADRID (Reuters) -Spain's acting Prime Minister Pedro Sanchez said on Wednesday he intended to seek the support of the lower house to form a new government after an inconclusive election on July 23.

"I will ask for parliament's confidence to form a progressive government," Sanchez said in a address to the legislators of his Socialist Party (PSOE).

He said his party, which won the second-highest number of seats in the general election held last month, will first seek to clinch the lower house speaker position on Thursday.

Spain's election in July produced no outright winner, with the conservative People's Party (PP) gaining the most seats but falling short of a majority. Both the PP and PSOE have since begun negotiating with smaller parties to court their votes in parliament to form a government.

Sanchez, who first took power in 2018, has ruled since early 2020 thanks to a minority coalition with the far-left Podemos party.

He did not say on Wednesday who his coalition partners would be, but has previously said he intends to ally with far-left alliance, Sumar that includes Podemos.

Sanchez's PSOE, which together with Sumar has 152 seats, will need the 14 parliamentary votes of Catalan separatist parties Esquerra Republicana de Catalunya (ERC) and the more hardline Junts to win an investiture vote in the 350-seat parliament.

While the ERC has indicated a willingness to reach an accord, Junts has stuck to its demands of permission to hold a referendum on Catalan independence and an amnesty for all separatists facing legal charges related to the region's 2017 failed independence bid. This includes its exiled leader Carles Puigdemont, who Spanish authorities are seeking to extradite from Belgium.

In a nod to the separatists, the Socialists have proposed Francina Armengol as speaker of the lower house. Armengol was regional president of the Balearic Islands from 2015-2023, where she governed in coalition with nationalist parties including the local version of ERC.

Junts has not yet indicated whether it will back Armengol's candidacy on Thursday.

The conservative People's Party won more seats than the Socialists, but did not secure an outright majority and faces an uphill battle as it so far lacks enough support to form a government.

It has so far failed to persuade the centre-right Basque Nationalist Party (PNV) to support its investiture even after the hard-right Vox attempted to clear the way for other parties to back the PP by hinting that it would not insist on being part of a right-wing coalition.

The PNV and Coalicion Canaria, which has one seat, had previously said they would not back a government that included the first far-right party since the dictatorship of Francisco Franco.

(Reporting by Inti Landauro and Charlie Devereux; Writing by Charlie Devereux; Editing by Andrei Khalip and Sharon Singleton)