Mugabe, opposition under growing pressure for deal

HARARE (Reuters) - Zimbabwe's ruling party warned power-sharing talks resuming on Tuesday risked collapse as it haggled with the opposition over roles in a new government.

Marathon talks have so far failed to secure a breakthrough.

After a second day of discussions, President Robert Mugabe told reporters on Monday there was no progress but a deal was still possible.

The negotiations are seen as the best chance to end a post-election crisis and raise hopes of economic recovery.

A source in the opposition MDC said Mugabe was refusing to give up executive powers, while an official from the ruling ZANU-PF said MDC boss Morgan Tsvangirai's demands could scupper chances for a breakthrough.

Talks began in July after Mugabe's unopposed re-election in June in a poll condemned throughout the world as unfair and boycotted by Tsvangirai because of attacks on his supporters.

The rival leaders ended a 14-hour meeting early on Monday.

Mugabe told supporters at a rally in Harare that there was progress in talks with Tsvangirai and breakaway MDC faction leader Arthur Mutambara. South African President Thabo Mbeki is mediating.

A ZANU-PF official told Reuters the talks were in danger of collapse.

"It looks like we have reached some kind of stalemate which is threatening the whole dialogue," the official said.

"Tsvangirai is moving goal posts, forcing us to negotiate issues which we had already agreed upon," he said, referring to whether Mugabe would head a new unity government.

"This is an issue that we had settled and he (Tsvangirai) is also suggesting that he must be given full authority to appoint any new government."

Neighboring countries fear the consequences of more instability in Zimbabwe. Deepening hardships have already driven millions of Zimbabweans to seek work abroad.

Political analysts say there are a host of issues that need to be tackled before a solid deal is possible.

First and foremost is whether Mugabe will be ready to give up some powers that have helped him keep a tight grip on Tsvangirai and other foes.

Control of immensely powerful security forces in the southern African country is another key question.

If Tsvangirai were to get only insignificant ministries, it might anger other MDC officials and supporters who braved what they say was a ruthless government crackdown during the election. The MDC says 120 of its supporters were killed.

Despite the difficulties, the discussions are seen as the clearest sign yet that an agreement could be within reach. They will resume in a Harare hotel at 3 p.m. (9 a.m. EDT) on Tuesday.

Investors are likely to remain cautious, however, seeking reassurances that any new government can rescue what was once one of Africa's most promising economies and create conditions that will make them feel safe.

(Additional reporting by Cris Chinaka and MacDonald Dzirutwe; writing by Michael Georgy, edited by Richard Meares)