ISLAMABAD (Reuters) -- The Pakistani government will restore democracy quickly in its biggest and politically most important province as part of reconciliation efforts, Prime Minister Yousaf Raza Gilani has said.
Gilani announced on March 16 that the government had agreed to reinstate a former chief justice dismissed in 2007 in a surprise move to defuse a crisis that had set Pakistan's two biggest parties on a collision course.
The concession came after the United States, alarmed that Pakistan was being distracted from tackling Al-Qaeda and Taliban militants on its Afghan border, said U.S. aid could be at risk unless the looming confrontation ended.
Analysts say tension will linger between President Asif Ali Zardari and his main rival, opposition leader and former Prime Minister Nawaz Sharif, and newspapers warned that celebrations should be tempered because political risks still lay ahead.
Nevertheless, stocks have risen sharply since the announcement of the chief justice's restoration and Credit Suisse said an easing of the political temperature would help cut Pakistan's political-risk premium.
Gilani told reporters he had spoken to Sharif and told him the government wanted to push forward with reconciliation.
"The top priority is to lift governor's rule in Punjab as soon as possible," Gilani said.
Both Zardari and Sharif covet control of Punjab Province, which returns more than half the members of the National Assembly.
A Sharif party government was thrown out of power there last month and Zardari imposed central rule, or governor's rule, after a Supreme Court ruling barred Sharif and his brother, until then the province's chief minister, from elected office.
The court ruling triggered the nuclear-armed U.S. ally's latest political crisis.
'We Are Not Winning'
The English-language "News" said in an editorial a lack of a clear plan for Punjab could be a source of tension.
"The immediate need is to reintroduce democracy in the country's largest province, allow its assembly to meet as soon as possible and elect its leader," the "News" said.
Sharif's party has the most seats in the Punjab assembly and is likely to regain control of the province.
The "Dawn" newspaper said Sharif's party could not be shut out of power in Punjab and the government risked more agitation and a "political slug-fest" if it tried to do that.
The liberal "Daily Times" said the end of the agitation over the judge would allow the government to focus on the economy that had been severely damaged by the political crisis, and on the battle against terrorism "that we are not winning."
A reminder of that came on the evening of March 16 when a suspected suicide bomber killed 14 people in the city of Rawalpindi.
Pakistan's main stock index celebrated the end of the confrontation on March 16 with a 5.4 percent gain. The index, which had fallen 1.9 percent this year after a 58.3 percent slide last year, was up 1.85 percent on March 17.
"Now the Zardari government should have the space to move forward and address other pressing issues...We could go back to a situation of more political harmony, an absolute necessity at a time of grave political crisis," the "Daily Times" said.
"The Nation" newspaper said several issues had to be resolved to prevent a resumption of hostilities, foremost among them being the powers of the president.
Zardari had promised to give up the sweeping powers that former president Pervez Musharraf assumed, including the power to dismiss the National Assembly.
"Suffice it to say, the economy cannot afford another bout of turmoil," it said.