Kenya's government yesterday said 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 UN 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 today, Mr Annan's statement added.

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," Mr 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 mobilising on both sides," it said in a new report.