Nepal's Maoists set terms to end political deadlock

A party flag of the Unified Communist Party of Nepal (Maoist) flutters above the crowd during a mass gathering in Kathmandu June 15, 2012.

KATHMANDU (Reuters) - Nepal's Maoist party on Thursday set out for the first time the conditions under which its prime minister would resign, an offer it said was aimed at ending a political deadlock with opposition parties that has paralysed one of the world's poorest countries.

But hours after the offer was made, leaders from two major opposition parties said they saw it as a ploy for the government to remain in power, rather than being a serious attempt to break the political impasse.

Prime Minister Baburam Bhattarai agreed to step aside provided that opposition parties accept the chief justice of the Supreme Court as the head of a unity government to oversee national elections, Maoist delegates to a party conference said.

A former rebel leader, Bhattarai has led a caretaker government since May last year, when parliament was dissolved after failing to reach a consensus on drafting a new constitution seen as key to Nepal's long-term stability.

Nepal is still recovering from a decade of civil war that killed more than 16,000 people before it ended in 2006. Its politics remain fractious, and recent squabbles over Bhattarai's staying in power have sparked violent street protests.

The hope is that elections in May this year will end the deadlock and pave the way for a national assembly to draft a new constitution, after the 239-year-old monarchy was abolished and Nepal became a republic.

"Our party has proposed the chief justice of the Supreme Court to lead the new government to hold elections in May as a formula to end the deadlock," delegate Surya Rimal told Reuters from Hetauda, 80 km (50 miles) southeast of Kathmandu, where the Maoists are holding their first national congress in 21 years.

RESIGNATION DEMANDS

Dilendra Prasad Badu, a spokesman of the main opposition Nepali Congress party, told the Kantipur news channel the Maoists were insincere. "It is only a ploy to lengthen their stay in power," Badu was quoted as saying of the proposal.

"The proposal goes against the norms of party politics and there are some constitutional problems as well," Pradeep Gwayali, a senior leader of the second biggest opposition party, the Communist UML, told the Kantipur TV channel.

Opposition parties have demanded Bhattarai resign after he failed to hold elections he ordered for November last year. The ongoing uncertainty of when elections will be held has fuelled unrest.

The political stalemate has led many industries to close and frightened investors in the Himalayan nation, which relies on foreign aid and tourism to prop up its economy.

The Maoists won elections in 2008 after joining a peace process two years earlier and are leading a rickety coalition with regional parties based on the southern plains.

"We have no other option than this and this is the last one to solve the crisis," said the Maoist party spokesman, Agni Sapkota.

(Editing by Matthias Williams and Jon Hemming)