KATMANDU – Welcome to the capital city of a state on the verge of bankruptcy. The roads are crumbling. There isn't enough street lighting. Power gets cut regularly, and trade has been dismal for years. Regular strikes and protest movements don't help much either, which scare off potential tourists from the Himalayan paradise.

Nepal represents the main crossing point between two of the most dynamic economies in the world, China and India. But it is also one of the planet's poorest countries, still very much dependent on international aid.

The economic stagnation can largely be blamed on endemic political gridlock that has long afflicted Nepal. A potential breakthrough came just last week when the country's three major political parties did manage to cobble together an 11^th-hour agreement to save the current Constituent Assembly. Still, the situation remains highly unstable. The agreement extends the life of the Assembly by three months -- and what happens after remains to be seen.

After three years of vain attempts to conclude a peace process and to draft a democratic Constitution, local observers are skeptical about whether the three major parties will ultimately be able to reach a deal. "We are sitting on top of a volcano," says Yubaraj Ghimire, a political analyst.

From the outside, the situation looks quite confusing, to say the least. Between 1995 and 2005 Nepal was embroiled in a lengthy civil war pitting government forces against Maoist rebels. Soon after the war ended, the country's monarchy fell, though the main political party, composed of ex-Maoist rebels, continued to struggle with ideologically-fueled internal divisions.

Five years have gone by since a peace agreement between the government and the Maoists was signed under the aegis of India. Nonetheless, there are still some fundamental political disputes to be addressed, among them the demobilization and disarming of more than 19,000 Maoist soldiers.

"In 2006, the Maoists and the opposition parties committed themselves to set up a truth and reconciliation commission, to hold an inquiry on human rights violations committed during the Civil war, to enable displaced people to return home, and to get to the bottom of the numerous missing-person cases. But nothing has been done," says Ghimire.

That explains why the Nepalese Congress, the main opposition party, refused until the very last moment to extend the life of the Assembly, which they accuse of playing into the Maoists' hands.

"This extension is a victory for the Maoists. They have refused to surrender their weapons and to demobilize their army the People's Liberation Army," says Narayan Wagle, editor-in-chief of the local Nagarik daily.

The Nepalese Congress did obtain one major concession: the promised departure of current Prime Minister Jhala Nath Khamal, a member of the unified Maxist-Leninist party, Nepal's largest communist party.

"Unlike the Maoists, the Nepalese Congress renounced Marxist-Leninist ideology 20 years ago and now they are advocating reforming socialism. But the party is split into two groups: on the one hand there are the liberal democrats and on the other hand, the former guardsmen who are ready to compromise with the Maoists," says Wagle.

The Maoists are also internally divided – between two vice presidents. One defends the idea of a people's republic based on the Chinese model, while the other is sympathetic to the idea of a parliamentary democracy.

"Prachandahis full name is Puspa Kamal Dahal, the Maoist party chairman, often changes his mind. One day, he backs one of his two vice-presidents, the day after, he backs the other one. Things are very unclear," Wagle says.

People's Liberation Army soldiers, who are now state employees, do not want to surrender their weapons without first obtaining guarantees that some of them will be able to join the national armed forces.

The Maoists are widely viewed as hindering the peace process and the establishment of a parliamentary republic. Yet they remain very popular with young people and in rural areas, where Hindu temples are often adorned with communist flags.

"The majority of the Nepalese population is very young. And young people want things to change rapidly," says Wagle. "Some of them see the Maoists as the party that will bring positive changes, that has established a republic and that defends the idea of a federal state, the poor and the trade unions. The opposition parties, in contrast, don't have charismatic leaders."

The Maoists' refusal to surrender their weapons is not the only thing hindering negotiations. Ethnic and language divisions are a stumbling block as well. The Nepalese population is divided into approximately 100 different ethnic groups.

Nepalese people practicing Hinduism are the country's largest ethnic group, but they are divided into various castes. Last Saturday, in front of the palace where political negotiators were meeting, members of the the small Hindu-affiliated party Rastriya Prajatantra were quick to demand the abolition of the Constituent Assembly.

"We want a constitutional monarchy that will defend the Hindu identity. The King embodies Nepal's unity. The Maoists want Nepal to become like China," says Rastriya Prajatantra party member Krish­na Hari Mainali.

The three-month extension for the Constituent Assembly gives all sides in the national debate a bit more wiggle room, though solving the deeper impasse will be a much trickier puzzle.

"The only lasting solution will be to form a coalition government that will include the main political parties, and to offer the position of prime minister to the Maoists in order to reassure them," he says.

Read the original article in French.

Photo - Annie Green Springs