Kenya opposition halts talks as protests flare

NAIROBI (Reuters) - Kenya's opposition suspended talks with President Mwai Kibaki's party on Tuesday and police fired tear gas to scatter opposition supporters protesting against deepening deadlock over a power-sharing cabinet.

Kibaki and rival Raila Odinga delayed naming a cabinet on Monday after disagreeing over how to share out ministries and traded blame over who was responsible for the deadlock.

The cabinet is central to a deal on ending Kenya's post-election crisis.

Anyang' Nyong'o, secretary-general of Odinga's Orange Democratic Movement (ODM), said talks would be suspended until Kibaki's party "fully recognizes the 50/50 power-sharing arrangement and the principle of portfolio balance".

Government spokesman Alfred Mutua condemned the walkout and accused ODM of playing games.

"They are the ones who do not want the coalition. How can they walk out of talks and make demands? Demands are made at the negotiating table," he said.

Nairobi's sprawling Kibera slum was convulsed by the biggest protests since both sides signed a power-sharing deal in February to end turmoil that killed at least 1,200 people after Kibaki's disputed re-election in December.

In a sign of mounting international concern, development partners including Britain, the United States, the World Bank and the United Nations said genuine power sharing was required to restore Kenyans' faith in the government.

"For the sake of Kenya we thus strongly urge the parties to agree very quickly on the formation of a coalition government," the group said in a statement.

"ROUGH RIDE"

Residents in Kibera said youths looted shops and burned tires. Some ripped up railway lines connecting the Kenyan port of Mombasa, the region's largest, with Uganda.

Protests spread to the western opposition stronghold of Kisumu, where police closed in on angry crowds. "They're saying 'No cabinet, no peace'," one witness said by telephone.

The shilling currency fell around 4 percent, its biggest one day fall since January 2, at the height of the violence.

"These politics can do real harm to our economy," said Friday Mwafuga, head of trading at Cooperative Bank. "Until this problem is solved, we are in for a rough ride ahead."

Kenya, east Africa's biggest economy and an important regional trade, transport and tourism hub, suffered heavily from the post-election riots and ethnic violence -- the worst turmoil since independence in 1963.

Nyong'o said the opposition was demanding a partial cabinet already named by Kibaki be dissolved before any more talks took place. He said the opposition would no longer respect an earlier agreement to a 40-member cabinet and wanted it to have 34 posts.

But some analysts believe that while Odinga's party is clearly stepping up the pressure to get what it wants, it has little room for maneuver.

"They can accept the offices offered, withdraw from the coalition or resort to mass action," said Kenyan political analyst Mutahi Ngunyi.

If they withdrew that would hand all power back to Kibaki, he said, but "mass action does not make sense at this time" because of the bloodshed it provoked in January.

Most of the recent disagreement centers on a handful of ministries that Odinga, the prime minister-designate, says Kibaki's Party of National Unity (PNU) had promised to give up.

PNU denies that, and Kibaki said on Monday he was ready to conclude the process of forming the cabinet as soon as possible.

One post not in dispute is finance, which means Finance Minister Amos Kimunya is almost certain to keep his job.

Duncan Kimani, a senior currency trader at Bank of Africa Kenya Ltd., hoped the dispute would not degenerate further.

"Already the country has suffered enough in terms of tourism and the supply chain being cut off," he told Reuters. "So a prolonged deadlock would mean that even the 4 or 5 percent growth target we're looking at might not be achievable."

(Additional reporting by Duncan Miriri, Wangui Kanina and Hereward Holland; Writing by Daniel Wallis; Editing by Katie Nguyen and Catherine Evans)

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