Spanish PM Zapatero says ETA ceasefire is holding

MADRID, Apr 18 (Reuters) Spain's prime minister said today a ceasefire ETA declared last month is holding and extortion letters received by businesses recently were sent by the Basque separatists before the truce.

ETA announced a permanent ceasefire on March 22, which Zapatero hopes will lead to peace talks and an end to the guerrillas' 38-year campaign for independence, during which about 850 people have been killed.

The government has insisted that there must be a total end to violence before anybody can sit down at a negotiating table.

''The latest report I have received from our security forces about the ETA ceasefire confirms that since March 22, the ceasefire is a real ceasefire that covers all aspects,'' Prime Minister Jose Luis Rodriguez Zapatero said in an interview on Cadena SER radio.

''All the information that our security forces have, confirm that these famous letters are letters that were ... sent before the ceasefire,'' he added.

Last week, media reported that businessmen in the northern region of Navarre had received more threatening letters from ETA, which has extorted money from firms in the Basque lands to fund its campaign.

Many politicians have said that any form of violence -- including extortion -- would break the spirit of the ceasefire and would prevent peace talks from going ahead.

Zapatero repeated that if security services continued to report that the ceasefire was ''real and credible'', he would ask for parliament's approval for face-to-face talks with ETA before the summer.

Last week, ETA said the road to peace would be long and hard but polls show most Spaniards now believe in the ceasefire.

Many analysts expect ETA will insist on holding a referendum on independence for the Basque country, which straddles northern Spain and southwest France.

However, many also suspect that the government will offer smaller steps such as returning ETA prisoners to the Basque Country from jails in other parts of Spain.

Reuters OM RS1523