COLOMBO (AFP) - A unilateral truce called by Tamil Tiger rebels was seen here today as a harbinger of talks, but Sri Lanka is still a long way from a political settlement to end decades of ethnic bloodshed.

The government promptly welcomed yesterday's offer of a month-long ceasefire by the rebel Liberation Tigers of Tamil Eelam (LTTE) from Christmas Eve, but a reciprocal truce is yet to be announced.

Officials in Prime Minister Ranil Wickremesinghe's office saw the Tiger move as a positive development but said that moves towards de-escalating the conflict would come after Christmas.

But Tamil legislator Joseph Pararajasingham said he expected Wickremesinghe to move rapidly towards peace talks following his victory at the Dec 5 parliamentary elections fought on a peace plank.

Political settlement

"It is clear that the (majority Sinhalese) south voted for peace," Pararajasingham said. "This is the best time to start a new peace process and ensure a political settlement."

Western diplomatic sources said there had been signs recently that the Tigers may be willing to climb down from their earlier hardline stand of a separate state for minority Tamils.

Diplomats, who declined to be named, said the Tigers may also be willing to compromise on their earlier demand to lift a ban, imposed by the government in 1998, before entering talks.

"The events after Sept 11 and the global coalition against terrorism appear to have had a salutary effect on the Tigers," a top Western diplomat said.

"The West is not forcing the government to talk with the Tigers who have been declared a terrorist organisation in the US, Britain, Canada and India," he said.

New dimension

"But if the Tigers are prepared to change their ways, I am sure the foreign governments will be willing to review their stand on the LTTE."

The Tiger truce added a new dimension to Wickremesinghe's visit to India, which starts Saturday, for talks with Prime Minister Atal Behari Vajpayee on the prospects of starting a peace process with the Tigers.

The West has encouraged Sri Lanka to seek the support of neighbouring India in reaching a final settlement to end three decades of bloodshed that has claimed the lives of over 60,000 people.

The problem in Sri Lanka is a serious concern to India because of its proximity and because it is home to 60 million ethnic Tamils who have close religious and cultural links with Tamils in Sri Lanka.

The Tigers have been banned in India since the group was blamed for the assassination of former Indian premier Rajiv Gandhi in May 1991.

Wickremesinghe will return home on Monday just before the LTTE ceasefire is due to go into effect.

"The prime minister will want to get a sense of India's bottom line in solving the conflict here," a senior aide said. "India is a crucial player in any equation and the PM wants to have India's blessings for a settlement."

Top priority

Government officials cautioned that although the new administration was keen to ensure speedy talks, the process was expected to be drawn out.

Peace with the Tigers is a top priority for Wickremesinghe who has taken over a treasury that is virtually empty and an economy which is this year set to record its worst performance since independence from Britain in 1948.

The growth rate this year is expected to be below zero.

"This is no longer a war that is fought with rupee, but dollars," a government banker said. "The government is in no position to keep up pumping six to seven percent of GDP to finance a dragging war."

During the election campaign, Wickremesinghe spoke of economic revival through a peace dividend.

The Tigers too are faced with manpower shortages and the international crackdown against their overseas funding has encouraged them to move towards the negotiating table, diplomats said.

For their part, the Tigers said their decision "should be viewed as a genuine expression of goodwill, demonstrating our sincere desire for peace and a negotiated political settlement."