Pakistani President Pervez Musharraf agreed Wednesday to step down as Chief of Army Staff by the end of 2004, resolving a row with an opposition Islamic alliance that had virtually paralyzed parliament.

Pakistani President General Pervez Musharraf speaks to the nation in front of a portrait of Mohammad Ali Jinnah in Islamabad Dec. 24, 2003.   [Reuters]

"I realize that it's time. I have decided that I will give up my uniform by December 2004 and will step down as Chief of Army Staff," he said on state television.

Speaking in Urdu and wearing military dress, Musharraf added: "These are all historic decisions. Nobody has won or lost because of these decisions. Democracy has won and the victory is Pakistan's."

Musharraf made the decision as part of a deal with the opposition Muttahida Majlis-e-Amal (MMA) -- an alliance of six Islamic opposition parties -- which have promised to abstain in a vote of confidence in the government expected early next year.

The agreement is likely to see the general's term in office extended until 2007, although any weakening of his links to the military could undermine his position.

Although he does not come away from the deal empty-handed, Musharraf's concessions could raise eyebrows in the West.

A key ally in the U.S. "war on terror," Musharraf has been hailed as instrumental to Pakistan's economic recovery and its crackdown on Islamic militancy, both domestic and international.

The move answers a key demand by the Commonwealth for suspended Pakistan to be re-admitted. It comes after months of wrangling with the MMA religious bloc over constitutional changes giving the president sweeping powers.

The package of amendments, called the Legal Framework Order (LFO), gave Musharraf the power to dissolve parliament and sack the prime minister.

The religious coalition, which counts supporters of Afghanistan (news - web sites)'s ousted Taliban regime among its leaders, has virtually paralyzed parliamentary proceedings with stormy protests and organized popular rallies against the president.

"It (the deal) will improve Pakistan's image abroad and give the world the impression that Pakistan is moving toward democracy," said Fazal-ur-Rehman, a prominent MMA leader.

EMBARRASSMENT FOR MUSHARRAF

The political deadlock has embarrassed Musharraf, raising questions over his commitment to democracy.

The general called elections in October 2002 to end military rule after his bloodless coup in 1999, but he has remained in ultimate control of the country while the government has run its day-to-day affairs.

In a referendum last year, which opponents said was rigged, Musharraf handed himself five more years in power.

Pakistan has been ruled by military dictators for around half of its 56-year history.

Under the agreement with the MMA, Musharraf will require the Supreme Court's approval before sacking the government.

Any suggestion that he is giving up powers will be greeted in the West with a mixture of gratitude for allowing democracy to take hold and concern that a trusted ally in a sensitive area bordering Afghanistan and India could be weakened.

Musharraf has led the hunt for hundreds of Islamic militants in Pakistan, including key members of the al Qaeda network blamed for the attacks on the United States in September, 2001.

He has also urged India to be flexible in its negotiations over the disputed Kashmir region, the trigger for two of three wars between the nuclear-armed rivals.

India's foreign ministry had no immediate reaction to the deal announced Wednesday. It is expected to be voted on in parliament by the end of December.

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