Kenyan rivals in possible breakthrough on PM

NAIROBI (Reuters) - Kenya's government said on Thursday it agreed in principle to creating a prime minister's post demanded by the opposition, a possible breakthrough in a political crisis some worry could explode into violence again.

Local and international pressure has grown for a deal to end the standoff over President Mwai Kibaki's disputed re-election in a December 27 vote. The opposition has threatened to resume street protests next week if its demands are not met.

Though the east African nation has been relatively calm for the last two weeks, the threat stoked fears of a resumption of the post-poll violence that killed at least 1,000 people and forced more than 300,000 out of their homes.

The unrest has damaged Kenya's reputation as a trade and tourism hub and one of Africa's most stable nations.

Government negotiator Mutula Kilonzo said the creation of a prime minister's post was now the focus of talks. "That is more or less agreed on. What we are discussing now is the post's functions, responsibilities, nature of appointment and so on."

Opposition negotiator William Ruto was also optimistic, though unspecific: "We are making progress."

And chief mediator and former U.N. secretary general Kofi Annan said the end of his difficult mission was in sight. "I'm beginning to see light at the end of the tunnel," he said.

Both teams were to meet with their leaders on "a joint proposal that had been largely agreed on the governance structure" before returning on Friday, Annan's statement added.

WOMEN'S VIGIL

With opposition leader Raila Odinga almost sure to take the premier's post, the key issue is how much power it will have.

"We will not give anybody a hollow shell," Kilonzo said, predicting a political deal would be reached by the weekend.

He added that the premier's post would come with a sunset clause that causes the position to expire either when parliament is dissolved or when a new constitution is enacted.

Both sides have agreed on the need for changes to Kenya's 45-year-old constitution, which many criticise because nearly all the powers rest with the president.

The crisis has laid bare issues of land, ethnicity, wealth and power that have dogged Kenya since the British colonial era, and have been habitually exploited by politicians over the decades.

The International Crisis Group think-tank warned people not to be fooled by the relative calm in Kenya. "The situation remains highly volatile ... Armed groups are still mobilizing on both sides," it said in a new report.

Kenyan athletes reacted angrily to an accusation in the report that they used money made on the international circuit to sponsor Kalenjin gangs who went on the rampage and killed hundreds of Kikuyus of Kibaki's group in the Rift Valley.

Women from a pro-peace coalition said they would dress in white and ring the talks' venue from Friday until a solution was found. "We will not relent until there is peace," the coalition said.

Kibaki sought to reassure Kenyans at a church service.

"Let us put everything before God and we will overcome all the challenges the country is currently facing," he said.

(Additional reporting by Jack Kimball and Andrew Cawthorne; Editing by Matthew Tostevin)