East Timor's ruling party Fretilin and an alliance led by ex-president Xanana Gusmao have agreed to form a unity government after last month's legislative elections, the country's president said yesterday.
No party won more than half the vote in the June 30 parliamentary elections and both Fretilin and the party set up by Mr Gusmao, CNRT, had previously ruled out a proposal by President Jose Ramos-Horta to form a unity government.
"The Fretilin party and the alliance have accepted the grand inclusion government but the problem is who will be prime minister and from which party, whether from Fretilin or the alliance," Mr Ramos-Horta said.
He said he would meet the parties this week to discuss the details, including a decision on the post of prime minister: "We hope we will find a good platform to maintain unity and stability."
Mr Ramos-Horta said the next government should focus on restoring stability and shoring up the economy.
The new parliament is due to be inaugurated on July 30 and Mr Ramos-Horta said a cabinet should be formed by the end of this month.
Fretilin won 21 seats in the 65-seat chamber in the election while the CNRT won 18 seats, the Association of Timorese Democrats-Social Democratic Party (ASDT-PSD) 11 and the Democratic Party eight. Smaller parties took the rest.
Fretilin is led by Mari Alkatiri, East Timor's first post-independence prime minister.
Mr Gusmao's CNRT, which the resistance hero established this year as a vehicle to become prime minister, the ASDT-PSD and the Democratic Party have formed a coalition. Fretilin, which led the 24-year struggle against Indonesian rule, remains popular, especially in the east of the country, but its candidates fared badly in the election.
Mr Gusmao, who ended his term as president in May, appears to have become frustrated by the pace of progress under Fretilin rule and by the factional infighting that broke out in East Timor last year.
The Fretilin government's sacking of 600 rebellious soldiers triggered factional fighting, and in the ensuing mayhem 37 people were killed and 150,000 were driven from their homes. Foreign troops led by Australia intervened to restore order, but sporadic violence and unrest have continued.
Troops from the Australian-led International Stabilisation Force surrounded fugitive East Timor rebel Alfredo Reinado's position in Alas village, Same district, last week in an attempt to head off deadly clashes with disgruntled supporters of the Fretilin party.
The heavily armed former military police commander is still insisting on holding talks with the country's leadership, but he has refused to surrender a cache of automatic rifles stolen from a police post several months ago.
He is wanted on murder and illegal weapons charges although senior UN officials in East Timor concede that even if he is brought to trial, it would most likely be on the reduced charge of manslaughter, in relation to a firefight with serving members of the country's army last year.