"The weekend will be crucial. We hope that next week we'll have something which can be agreed," newly-elected African Union chairman Jean Ping told a news conference in Nairobi.

The opposition has demanded a powerful role as executive premier for their leader Raila Odinga, who accuses President Mwai Kibaki of rigging the Dec. 27 poll.

Kibaki's team says he won fairly, and accuses the opposition of instigating riots and ethnic violence that killed 1,000 people, displaced 300,000 and wrecked Kenya's image as a stable business, tourism and transport hub.

The government agreed on Thursday to set up a new post of prime minister. Both sides have yet to thrash out the most contentious issue of how much power it will have.

Odinga's Orange Democratic Movement (ODM) has withdrawn an earlier demand for Kibaki to resign, but is threatening to resume street protests if requirements for the new prime minister's post are not met by Wednesday.

Chief mediator Kofi Annan said he was beginning to see "light at the end of the tunnel".

And the government has predicted a deal in days.

Ping, elected at an AU summit in Ethiopia earlier this month, is the latest in a succession of high-powered visitors who have pushed Kenyan leaders towards common ground.

"Things are moving towards a good direction," he said.

He met opposition officials on Friday and was due to see Kibaki later.

"DOMESTIC PRESSURE"

Pressure has grown on both sides of the political divide to reach a lasting deal to end turmoil that has horrified locals, neighbouring states and world powers alike.

"The most effective way to get these issues solved is for the leaders to feel pressure from their own people," U.S. President George W. Bush said late on Thursday as he flew home from an Africa tour where the crisis was on high on the agenda.

"We'll help. We send people over and we'll stay engaged."

Odinga left Kenya on Friday on a private trip to Nigeria, but that was not expected to have a bearing on the talks.

Though the east African nation has been relatively calm for a fortnight, the protests ultimatum has stoked fears of a resumption of the post-election bloodshed.

Earlier demonstrations often descended into looting and tribal attacks, and were met with a tough police response.

The East African Community (EAC) warned that the unrest has choked supplies of fuel and other goods to landlocked neighbouring states, threatening jobs and economic growth.

"Trade flows have been negatively affected and so have exchequer and business revenues," EAC boss Juma Mwapachu said in a statement. "We can only promote and attract investments sustainably, as well as assure effective intra-regional trade, if we have enduring peace and stability."

The crisis has laid bare issues of land, ethnicity, wealth and power that have plagued Kenya since British colonial rule, and have often been exploited by politicians since then.

Both sides have agreed on the need for changes to the country's 45-year-old constitution, which many criticise because nearly all the powers rest with the president.