SANAA Yemen's government agreed upon a team of officials on Sunday to oversee the military after four days of battles threatened to wreck a deal easing President Ali Abdullah Saleh from office.
At least two people were killed on Sunday in fighting between Saleh loyalists and opponents in the city of Taiz, the centre of 10 months of protests that have driven the Arab world's poorest country to the brink of civil war.
Sunday's fighting brings to at least 19 the number of fatalities since Thursday from fighting in Taiz, in the south.
The opposition welcomed the appointment by Vice President Abd-Rabbu Mansour Hadi of the committee of ministers and officers who will oversee the end of fighting and the return of forces to barracks.
"The formation of the committee is a good step," said Yassin Noman, leader of the opposition Joint Meeting Parties, which had agreed with the government that the body would include equal numbers from JMP and Saleh's General People's Congress.
"What concerns us is continued moves towards implementing the transfer of power under the ... Gulf initiative without the nomination of anyone accused of human rights violations," Noman said in remarks to Reuters, in an apparent reference to Saleh allies accused of involvement in a bloody crackdown on protests.
The European Union has urged the government and opposition to agree quickly to a unity interim cabinet.
The deal to remove Saleh was crafted by Yemen's richer Gulf Arab neighbours, which share U.S. fears that a political and security vacuum will embolden the Yemeni branch of al Qaeda, and see multiple internal conflicts turn into full-blown civil war.
Saleh signed the deal last month after repeatedly balking, and it has been backed by the United Nations.
But implementation has bogged down over the formation of a government that would lead the country to a presidential election in February and the makeup of the body to run the military - key units of which are led by Saleh's relatives.
Workers at a field hospital in Taiz, some 200 km south of the capital Sanaa, said a woman and child died from injuries suffered while trapped in a building hit by artillery fire.
The fighting eased later on Sunday. Gunmen from anti-Saleh factions held positions outside schools and government buildings - their windows shattered and their walls pocked with bullet holes - in a district of the city near where battles had raged.
Residents said on Saturday government forces had used artillery, tanks and rockets in residential areas of Taiz, trapping about 3,000 families during skirmishes with opposition fighters who responded with medium and light fire.
The province's governor was trying to negotiate a ceasefire between units loyal to Saleh - including the well-armed Republican Guard commanded by his son Ahmed - and his enemies.
"There's no doubt that the army were responsible for some of the civilian deaths," Governor Hammoud Khaled al-Soufi told reporters. "Both sides shelled randomly into the city, that was a huge mistake."
One resident whose house was partly destroyed in the fighting said government forces had directed heavy fire on gunmen operating from residential areas.
"The gunmen are using hit-and-run tactics, firing from houses and then fleeing," said Najib al-Muwadim.
Prime Minister-designate Mohammed Basindwa, an opposition leader, has warned his side would rethink its commitments under the transition deal if the fighting in Taiz did not stop.
Political crisis has frequently halted the modest oil exports Yemen uses to finance imports of basic foodstuffs, and ushered in what aid agencies deem a humanitarian crisis. More than 100,000 people have been displaced by military conflicts in both the north and south.
The EU envoy to the country, Michele Cervone d'Urso, told a news conference in the capital earlier on Sunday that he hoped to see the cabinet and military committee agreed within days.
"It is time for Yemenis to see the benefits of a peaceful transition. They hope to see electricity and the dismantling of military checkpoints."
(Writing by Joseph Logan and Firouz Sedarat; Editing by Michael Roddy)