Nepal steps back from abyss, long trek ahead

But the challenges are only just beginning for one of the world's poorest countries as it tries to build a new road towards peace and bring an end to a decade-long Maoist insurgency.

"It was a remarkable climbdown by the king, and overall we must be happy with this," said Rhoderick Chalmers of the International Crisis Group think-tank. "But that doesn't mean we shouldn't be looking at the various problems which need to be addressed."

The biggest problem is undoubtedly the insurgency, and how to bring Maoist rebels, who control vast swathes of the countryside, back into the political mainstream.

The rebels are demanding elections for an assembly to write a new constitution -- something the political parties promised when they entered a loose alliance with the guerrillas to end royal rule last year.

The parties have vowed to honour that promise by calling constituent assembly elections as soon as parliament reconvenes on Friday. They also plan to offer the Maoists a ceasefire. If accepted, it would be a major step forward.

On the face of it, the Maoists hardly seem in the mood to trust them, denouncing the king's climbdown as "a sham" and accusing the parties of making "another historic mistake".

The rebels initially clamped a blockade on Kathmandu and other district capitals, but later suspended it until Friday -- on condition that parliament call elections for an unconditional constituent assembly.

Their strongly worded statement on Tuesday raised some diplomats' hackles, and is sure to have rung alarm bells in Washington, whose ambassador refers to the Maoists as terrorists who simply cannot be trusted.

But other observers say there was as much bluster and posturing in the Maoists' statement as genuine anger.

"It was a warning to the parties not to forget promises they made, and it was also designed to ensure the (Maoist) rank and file don't rebel over this," said Kunda Dixit of the widely read Nepali Times.