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The Mexican government on Tuesday hailed a tentative breakthrough in efforts to find a peaceful solution to a crisis that has plunged the normally tranquil colonial city of Oaxaca into anarchy for almost five months.

Eight hours of talks between Carlos Abascal, interior secretary, and leaders of striking teachers and self-proclaimed “People’s Assembly” (APPO) ended with renewed hope of an end to a crisis that began with a dispute over teachers’ pay and conditions and blossomed into an open political revolt.

State authorities have had to go into hiding in Oaxaca, in southern Mexico, where APPO members, not police, patrol the streets, and hand out “people’s justice”.

Picturesque lanes where tourists once strolled are barred by barricades, while historic walls are covered in spray-painted slogans, some proclaiming “Death to capitalism”.

At least five people have been killed. A teacher who opposed the strike was found dead at the weekend with his throat slit.

The government of Vicente Fox, president, has repeatedly said it will at all costs avoid resolving the crisis by force. But Felipe Calderón, president-elect, has made equally clear that, faced with a host of other political problems, he wants a solution in Oaxaca before he takes power on December 1.

After Monday’s crisis meeting Mr Abascal announced that both sides had agreed that order should be restored by state police under the command of a senior federal official. Neither federal police nor the armed forces would be involved.

Teachers’ and APPO leaders would consult their rank and file before calling off the strike and the occupation of the city centre, government officials said.

But approval of the peace formula seems far from assured.

Flavio Sosa, an APPO leader, told a radio interviewer on Tuesday that his movement was holding out for its central demand: the ousting of Ulises Ruiz, the state governor.

The fate of Mr Ruiz lies in the hands of the Senate, which has so far proved reluctant to remove him.

On Tuesday, the Senate building in Mexico City was ringed by thousands of protesters from Oaxaca who had arrived the previous day after a 450km march to demand that senators wield the axe.

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