Yanukovich and opposition sign deal to defuse crisis in Ukraine

Viktor Yanukovich and Ukraine opposition leaders have signed an agreement that will curb the embattled president's powers and bring about a leadership election by the end of this year in a bid to end the violence that has brought the country to the brink of civil war.

Parliament also adopted legislation that could allow the release from jail of the president's arch-foe, the opposition leader Yulia Tymoshenko, amid growing signs that Mr Yanukovich's power base is crumbling. But among groups of the broader, anti-government protest movement, there was a sense that the deal did not go far enough because it did not result in the immediate resignation of Mr Yanukovich.

The compromise agreement followed a massacre in Kiev on Thursday that sparked outrage in the international community. As many as 70 Ukrainians were killed in the capital's central square when protesters were fired on by unidentified snipers, who appeared to be members of the security forces, and crushed by heavily armed riot police.

Addressing the nation through a statement posted on the presidential website on Friday, Mr Yanukovich described the events as "tragic".

Parliament voted late on Friday afternoon to curb his powers by shifting the state back to a parliamentary system. Despite earlier scuffles in parliament, 386 of 397 lawmakers voted in favour and celebrated immediately after by standing up to sing the national anthem.

Speaking outside the presidential administration offices, Radoslaw Sikorski, Poland's foreign minister, said: "I'm satisfied that this is the best agreement we could have and it gives Ukraine a chance to return to peace, to reform, and hopefully to resume its way towards Europe."

He added that he hoped "just liked the Solidarity revolution in Poland eventually succeeded [in the 1980s], the Maidan revolution will also one day succeed", referring to Ukraine's chances of closer integration with Europe.

In Moscow, the deal was received cautiously. Leonid Slutsky, head of the Duma committee for the CIS and Eurasian integration, said Russia was ready for dialogue with a new Ukrainian government on all levels. However Vladimir Lukin, Russia's representative involved in Thursday's late-night talks, had left before the peace deal was signed.

"The chance for peace in Ukraine exists," Mr Lukin said. "But the situation is very difficult, very volatile. Talks will continue, including our partners in Europe." He added that Moscow had "made a mistake in coming too late to join the negotiation".

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Mr Trenin also said it looked like Russia had remained on the sidelines. "What the Russians are incensed with is that the Europeans went ahead and did a deal," he said. "This will weigh on the relationship ahead."

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Mr Yanukovich's majority showed signs of crumbling through the day amid reports of defections. Lawmakers adopted legislation facilitating Ms Tymoshenko's release and also voted to remove the interior minister Vitaly Zakharchenko, who has been implicated along with the president for the deaths. However, the latter may only be possible to enact once constitutional changes have been introduced.

Mr Yanukovich was expected immediately to sign the measures into law as part of the deal, possibly on Friday night, and legislation ordering the release of protesters and granting them amnesty.

"I am initiating snap presidential elections and a return to the 2004 constitution with a shift of authority towards a parliamentary republic," he said. He also called for the formation of a "national government of trust" to "preserve the lives of people, peace and calm on our land".

However, the broader anti-government protest movement, particularly the most militant Right Sector that has suffered a number of casualties, appeared unwilling to accept the deal. Representatives called for the "revolution to continue".

Dmytro Yarosh, the movement's leader, criticised the deal for not delivering on the immediate resignation of Mr Yanukovich, whom he referred to as a "pseudo-president".

A presidential election is to be held no later than December after a revised constitution is adopted.

<>"We signed the agreement to prevent the break-up of the country . . . to save people's lives . . . so that our country can be preserved," said Arseniy Yatseniuk, faction leader of Ms Tymoshenko's Fatherland party. He predicted she would soon be released from prison.

Sberbank, Russia's largest bank, said it had suspended lending to new clients on Friday after a run on its ATMs a day earlier. "There was a run on our ATMs yesterday, mostly from customers of other banks which are experiencing liquidity problems," said Herman Gref, the state lender's chief executive. He said Sberbank's Ukrainian subsidiary would continue to serve existing customers and had no plans to retreat from the country because it was profitable.

Lawmakers moved to adopt legislation granting financial assistance to families who have lost relatives or protesters who have become disabled through injuries. Hundreds of protesters and police have been injured during the three-month protests. The most common injuries among those hit by rubber bullets and stun grenades have been loss of vision and limbs.

Pressure is intensifying on the teetering economy. Standard & Poor's, the rating agency, said on Friday Ukraine "will default" without significant improvements in the political situation "which we do not anticipate". It lowered its rating for Ukraine by one notch to CCC, with a negative outlook.

With additional reporting by Peter Spiegel in Brussels

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