Mugabe: There are only 'little hurdles' to Zimbabwe deal

Mugabe was set to resume talks later on Monday with opposition leaders on a deal that could end a post-election political crisis and raise hopes of economic recovery.

The Zimbabwean leader told supporters at a rally in Harare that there was progress in talks with opposition MDC leader Morgan Tsvangirai and the leader of a breakaway MDC faction. South African President Thabo Mbeki is mediating.

Close to a deal: Zimbabwe's President Robert Mugabe walks out from the Rainbow Towers hotel in Harare this morning

"We had a long night negotiating on some little hurdles and I thought I should raise my fist but he (Mbeki) remained cool and said: 'Let us continue talking'," Mugabe said in a speech to honour those who died fighting in Zimbabwe's liberation war. He has been in power since independence from Britain in 1980.

Negotiations began last month after Mugabe's unopposed re-election in June in a poll condemned throughout the world and boycotted by Tsvangirai because of attacks on his supporters. The latest meeting ended after 14 hours early on Monday.

Tsvangirai declined to comment after the last session of talks. Mbeki's spokesman, Mukoni Ratshitanga, said the South African leader was returning home on Monday. But he declined to say whether a deal was imminent or whether the talks could fail.

Both sides are under international pressure for a deal, particularly from neighbouring countries that fear the consequences of a total meltdown in Zimbabwe. Economic collapse has already driven millions of Zimbabweans to seek work abroad.

Displaying his usual defiance of outside pressure for political reforms in Zimbabwe, Mugabe said Western sanctions "effectively undermine the rapprochment which should otherwise be cemented through the inter-party dialogue".

Talks: Zimbabwe's Movement for Democratic Change opposition leader Morgan Tsvangirai is escorted out of the Rainbow towers hotel

Negotiations: South African President Thabo Mbeki

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 of the 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.

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.

A deal would hand Mbeki a political coup before he hosts an Aug. 16-17 summit in South Africa of regional leaders who mandated him to mediate in Zimbabwe.

Mbeki has dismissed criticism that he has been too soft on Mugabe, arguing a tougher line would only aggravate tensions and undermine efforts to ease suffering in a country with the world's highest inflation rate of over two million percent, chronic shortages of basic goods and 80 percent unemployment.