The prime minister will not find a legal challenge easy

In a televised address, Chandrika Kumaratunga justified her decision to sack ministers and suspend parliament.

Speaking hours after lifting emergency rule, she accused Mr Wickramasinghe of "wilful neglect" of the military that had endangered Sri Lanka's security.

Mr Wickramasinghe, accused of making too many concessions to Tamil Tiger rebels, is thought unlikely to accept.

Earlier, he returned from the United States amid scenes of rapturous welcome - it took him at least six hours to make the trip from the airport.

President Kumaratunga had suspended parliament in his absence and sacked three key ministers.

Sri Lankan officials said emergency rule would be replaced by less draconian security regulations.

Although none of the emergency actions had been carried out, a state of emergency gives broad powers to the military, bans public gatherings, gives the president lawmaking powers and allows media censorship.

'Grand alliance'

Mrs Kumaratunga accused the government of neglecting the armed forces - and sought to justify her decision to take back from the prime minister defence and security powers.

She said "numerous arms shipments have been brought into the country" since Mr Wickramasinghe had come to power about two years ago - and subsequently signed a ceasefire agreement with the Tamil Tigers.

HAVE YOUR SAY This is a deliberate move by the president to derail the peace process at a time Bala Ratnam, US Send us your comments

She called on all parties represented in parliament to "join me in an attempt to form a grand alliance... with the objective of forming a government of national reconstruction and reconciliation".

"I am ready to commence discussions on these proposal with leaders of all parties," including Prime Minister Wickramasinghe, she said.

The BBC's Frances Harrison in Colombo says the offer may seem conciliatory, but it is unlikely Ranil Wickramasinghe will agree to govern on the president's terms - especially after his huge show of strength on the streets on Friday.

Power struggle

Mr Wickramasinghe returned to Sri Lanka to a rousing welcome on Friday after an official visit to the US.

Arriving at Colombo airport, where he was mobbed by jubilant crowds, he said the president's actions had endangered the peace process.

"We have to ensure that parliament is re-summoned immediately for the peace process to continue," the prime minister said.

In pictures: PM returns

Mr Wickramasinghe said his priority was to get the peace process back on track "with discussions with everyone in Sri Lanka".

He said President George W Bush had expressed his support for the government.

The Norwegian-led peace process with the Tamil Tiger rebels will continue but under strict terms, Mrs Kumaratunga said in her address.

She said the prime minister could continue to run the peace process, but without any power over the military.

Many fear a confrontation between the prime minister and the president will mean a protracted power struggle which could ultimately jeopardise the peace process - and spill over into violence on the streets.

Tamil Tigers have vowed to remain patient during the political upheaval.

But if Mrs Kumaratunga does come out on top of this power struggle, she may face some resistance from an international community which has expressed concerns for the future of Sri Lanka's peace process, our correspondent says.