Nepal to set up interim government with rebels

KATHMANDU, June 16 (Reuters) Nepal's government agreed today to dissolve parliament and set up an interim administration including Maoist rebels after a day of top-level peace talks in the capital, the two sides said.

Rebel chief Prachanda said the Maoists would also dissolve their parallel governments around the countryside.

''We will dissolve the old parliament, we will dissolve our governments, this is the main spirit of the decision taken in today's meeting,'' Prachanda told reporters after nearly 10 hours of talks with Prime Minister Girija Prasad Koirala and top political party leaders.

''A new interim constitution will be prepared within three weeks and after that the new interim government will be formed,'' he said.

Prachanda was speaking at a joint news conference with leaders of some of Nepal's seven main political parties.

The reclusive rebel leader, who flew to the capital in a private helicopter from western Nepal, was making his first known visit to Kathmandu since launching an insurgency in 1996.

The talks were aimed at ironing out differences between the two sides before landmark elections are held for a special assembly meant to draft a new constitution and review the role of the king.

The two leaders, assisted by their negotiators, talked for two hours before leaders of Nepal's six other main political parties joined them at the prime minister's high-security official residence.

Nepal's peace process burst into life after King Gyanendra surrendered power in April after weeks of street protests and reinstated parliament.

Since then, Koirala's multi-party government has agreed a ceasefire with the rebels, stripped the king of almost all of his powers and agreed to the Maoist demand for elections to draft a new constitution.

The Maoist insurgency has left at least 13,000 people dead And has badly hurt the aid and tourism-dependent economy of the Himalayan nation, one of the world's 10 poorest.

It has also forced tens of thousands of people to flee the violence in the countryside and take refuge in the cities or in neighbouring India.

REUTERS MP PM2046