A senior Maoist leader said that a ceasefire and peace talks with the government were headed towards collapse and warned of a return to war. "The peace talks are at a very critical moment and are on the verge of collapse. The government is trying to disrupt the peace process by getting close to the king," said Baburam Bhattarai.

The Maoists and an alliance of seven political parties led mass street protests in April that forced King Gyanendra to give up absolute rule after he seized power in February 2005.

"The government is trying to push us back to war. If the dialogue fails we will start a third revolution and that will be centered in the city," Bhattarai told reporters, warning the rebels will not go back to the countryside.

The rebel leader’s remarks came after Prime Minister Girija Prasad Koirala said on Sunday that the king should be given a space in democracy.

"Everybody including the king, Maoists and fringe parties should be given a space in democracy to prevent them from being frustrated," Koirala told reporters.

Bhattarai criticized the remarks which he said "hurt" the Maoists. "The way the prime minister compared us and the king is not acceptable to us."

Since May the two sides have observed a ceasefire and held talks on managing rebel and army weapons. The rebels are due to join an interim government ahead of elections to a constituent assembly to rewrite the constitution and decide the monarchy’s future.

But the two sides failed last week to agree on a format for any of the issues after consultations with a visiting UN team trying to see how it could help the peace process.

The government has urged the rebels to surrender arms under UN supervision ahead of the elections due to be held by April 2007. The rebels, who say they are ready to join mainstream politics, have refused to disarm.

But they say they are ready to place weapons in sites under UN supervision providing there are similar controls on the army.

The latest peace effort is the third time the government and the rebels have tried to end the insurgency that has claimed more than 12,500 lives since 1996.