Sri Lanka has welcomed comments by the leader of the Tamil Tigers that the rebels are ready to drop their long-standing demand for independence.

The government's chief negotiator, GL Peiris, said the statement raised hopes for a peaceful settlement to the long-running conflict.

On Wednesday, Tamil Tiger chief Velupillai Prabhakaran declared that he would settle for provincial autonomy and self-rule in Tamil-dominated areas in the east and north.

We find much of the substance in his statement encouraging

GL Peiris

But he also warned that the Tamils would resume their struggle for a separate state if a political solution could not be reached in peace talks facilitated by Norway.

Mr Peiris said he was encouraged by Mr Prabhakaran's speech, which was "a world of difference" from earlier ones.

"The ongoing peace talks are not going to fail," he told a news conference in the capital, Colombo.

The rebel leader's speech coincided with Martyr's Day, which is held by Tamil Tigers to honour their fallen comrades, and there was heightened interest in it this year because of the peace process.

More than 60,000 people have died in two decades of civil war in Sri Lanka.

Praise

Mr Prabhakaran praised the Sri Lankan Government led by Prime Minister Ranil Wickramasinghe for its "bold" and "honest" approach towards peace.

The rebel leader hardly ever appears in public

But he also asserted that no condition or deadline can be set for the peace talks to resolve the Tamil issue.

He was indirectly referring to US Deputy Secretary of State Richard Armitage's demand that the Tamil Tigers publicly renounce violence and terrorism and Mr Wickramasinghe's remark that the peace talks next year would focus on core political issues.

Mr Prabhakaran also commended the international community for pledging $70m in Oslo earlier this week to reconstruct war-torn areas in Sri Lanka.

Peace moves

23 February: Government and rebels agree a ceasefire 16 September: First round of talks in Thailand 31st October: Second round of talks in Thailand 25 November: Donors pledge money for reconstruction

He, however, added a lot remained to be done to restore full-scale normalcy.

Mr Prabhakaran said it was his deepest desire that the current peace talks would succeed and he said the Tamil Tigers were prepared to discuss all issues.

The BBC's Frances Harrison, reporting from Tamil-held territory, says the remarks are significant because some Sri Lankans say the rebels do not want to talk about a final settlement because they are not serious about peace.

A spokesman for President Chandrika Kumaratunga was quoted as saying that the threat to secede "should be a wake-up call for the current government".

Hours before Mr Prabhakaran's speech, the president had called on the Tigers to give up their weapons in order to demonstrate their sincerity towards peace efforts.