Louis Michel pressed both sides to resume negotiations

Somalia's interim government and rival Islamists have agreed to resume peace talks, a European Union envoy says.

The news came after a day of heavy fighting close to the base of the weak Somali interim government in Baidoa.

After meeting representatives from each side, envoy Louis Michel said both were committed to re-starting talks without conditions and had agreed a ceasefire.

But even as Mr Michel held talks in Baidoa, fighting continued only a few kilometres away.

Hundreds of people are reported to have died in those clashes, the BBC's Adam Mynott says, giving the EU envoy's announcement of progress a hollow ring.

After talks in Baidoa, Mr Michel travelled on to Somalia's capital, Mogadishu, where he met leaders of the Union of Islamic Court (UIC).

He then announced both parties had agreed to resume efforts to find a negotiated settlement of their differences.

A nine-point memorandum of understanding included agreement to begin talks again without preconditions, he said.

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The Union of Islamic Courts had set aside a demand that Ethiopian troops withdraw from Somalia as a precondition for talks, Mr Michel added, although it remained a major grievance.

Translating these verbal and written commitments into action will be the next big test, our correspondent says.

Mr Michel has urged both sides to begin talks as soon as possible, at the latest early in January.

Both sides have blamed each other for the fighting.

Ethiopia says it has no troops in Somalia, but our correspondent says that as he drove to the airport in Baidoa, he was stopped by a huge convoy of Ethiopian military armour.

There have been fears Somalia's conflict will plunge the entire region into crisis.

The UIC has introduced law and order to the capital and much of southern Somalia for the first time in 15 years and denies links to al-Qaeda.