The New Nation - Internet Edition

AFP, Kathmandu

Nepal's veteran prime minister announced his resignation yesterday in a move that paves the way for a new Maoist-led government following the abolition of the monarchy.

The announcement by centrist politician Girija Prasad Koirala, who is 83 and in failing health, resolves a political stalemate over power-sharing that followed the declaration of a republic on May 28.

The Maoists have positioned their leader, Prachanda, to replace him as leader of the landlocked Himalayan nation and one of the world's poorest countries.

The prime minister, whose Nepali Congress party was soundly defeated by the Maoists in April polls for a 601-member constitutional assembly, called on the ultra-leftists to form the next government.

"I declare I have given up the prime minister's post through this assembly today. With me or without me, we all need to maintain the culture of consensus," Koirala told the body.

"I appeal to them (the Maoists) to garner consensus for the formation of a new government under their leadership," Koirala also said in a statement read out by Ram Chandra Poudel, Nepal's Peace Minister.

The Maoists and Congress-Nepal's two main parties-have been arguing for weeks over who should become the first president and prime minister of the world's youngest republic.

On Wednesday, they reached a deal that the president and prime minister will be elected through the assembly that will draft Nepal's new constitution.

"Now we all must focus on drafting a new constitution by giving up our petty political differences and ending confusion," Poudel said.

Prachanda and second-in-command Baburam Bhattarai joined hundreds of other assembly members showing their approval of Koirala's resignation by banging on the tables in the massive assembly hall.

Nepal's Maoists, who have 220 seats in the assembly, twice as many as Congress but just less than a majority, welcomed the veteran premier's resignation.

"We are glad he finally did it. We have been demanding his resignation as it had been a stumbling block for the leaders trying to reach consensus," Maoist spokesman Krishna Bahadur Mahara told AFP.

"The resignation is a step towards the formation of the government under our leadership," he said.

Koirala's party is likely to remain outside the new government that will be led by the former rebels, Congress officials have said, and he will not stand for election as president.

Girija Babu, as he is affectionately known, began his political career in 1947 as a union organiser in his home town of Biratnagar in southern Nepal.

He was imprisoned by Nepal's deposed royals in 1960, and spent seven years behind bars before going into exile in India.

In 1973 he masterminded the hijacking of a Royal Nepal Airlines plane known to be carrying hundreds of thousands of dollars in cash from the state bank to fund his then-banned Nepali Congress party.

His latest stint in government began in 2006 after he became prime minister following an unsuccessful 14-month period of direct rule by ex-king Gyanendra.

Koirala and Prachanda, whose name means "the fierce one," are credited with ending a decade-long civil war that killed at least 13,000 people until it was ended in a 2006 peace deal.

The rebels launched their "people's war" with the aim of toppling the monarchy and establishing a communist republic, but since the 2006 peace deal, they have said they will follow democratic norms and not return to war.