Ecuador's interior minister resigned on Tuesday after opposing President Lucio Gutiérrez's plans to replace purged supreme court justices.

Jaime Damerval had sided with the opposition by proposing the creation of an electoral council to designate replacements for the sacked judges. Mr Gutiérrez, who opposes that idea, has proposed a national referendum on the issue.

At Mr Gutiérrez's urging, Ecuador's Congress voted narrowly in December to sack 27 of the 31-member supreme court, a move that the president said would make the high court more representative. The sacked judges were widely seen as having close links with the opposition Social Christian party.

The move has provoked strong opposition domestically, with accusations that Mr Gutiérrez wants to pack the court with his cronies. The issue has led to increasing social tension, bringing about 100,000 people on to the streets of Quito last week in rival demonstrations.

Tuesday's resignation comes as the legitimacy of the government's judicial reforms is also being questioned internationally. Leandro Despouy, the United Nations envoy on judicial independence and human rights, said last week he wants to visit the country to assess the “serious crisis that is affecting the Ecuadorean judicial system”.

The political crisis is hampering efforts to proceed with much-needed reform reform in the oil, electricity and financial sectors. On a visit to the country last week, Rodrigo Rato, managing director of the International Monetary Fund, emphasised the importance of securing agreement on the reform programme.

“It is very important that the various political parties and social groups forge the consensus that will be necessary to move ahead with these reforms,” Mr Rato said.

The instability may also affect Ecuador's hopes to return to international debt markets for the first time since defaulting in 1999. The Finance ministry said last week that it hopes to issue new global bonds for a total of $895m.

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