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By Robert Garran and Mary-Louise O'callaghan

SYDNEY, Australia (June 7, 2000 – The Australian)---John Howard warned yesterday that the instability that has swept Fiji and the Solomon Islands could spread to Australia's nearest neighbor, Papua New Guinea.

The Prime Minister threw his personal support behind his PNG counterpart, Sir Mekere Morauta, telling the Coalition party room he was a "fundamentally honest prime minister challenging a corrupt political culture."

He will meet Sir Mekere today in Tokyo, where both leaders will attend the funeral of former Japanese Prime Minister Keizo Obuchi.

The Solomons crisis escalated yesterday with a fresh outbreak of fighting between rival forces in the nation and an offer to resign by Prime Minister Bartholomew Ulufa'alu.

Mr. Ulufa‘alu offered his resignation after being taken at gunpoint on Monday by the Malaita Eagle Force, led by lawyer Andrew Nori. He is attempting to head off a civil war between the Malaitan rebels and the rival Isatabu Freedom Movement, which asserts indigenous right to land on the nation's main island of Guadalcanal.

Fighting yesterday ended a ceasefire but gave the freedom movement control of Honiara's Henderson Field international airport.

About 700 Australians remain in the Solomon Islands. An air evacuation is not yet possible since the Isatabu Freedom Movement has not guaranteed the Australian High Commission safe passage to and from the airport.

A gun battle reportedly involving 1,000 people continued for hours near the abandoned airport yesterday.

The Department of Foreign Affairs and Trade assesses Australians in Honiara to be at greater risk than those on coup-stricken Fiji.

Mr. Howard told Coalition members that unrest in the Pacific showed Australia was in a "less stable political and strategic environment."

Conditions had improved in Papua New Guinea under the government of Sir Mekere, but Mr. Howard said he was concerned about the forces lined up against his attempts at reform. "There is always a risk involved in that," he said.

Mr. Howard defended Australia's decision not to send police to the Solomons, arguing it was "not in our interest to put unarmed Australian police in the front line."

But Kim Beazley said the government should have answered the "constant cry for help" from Mr. Ulufa‘alu to provide police.

In Honiara, the Cabinet meeting considering Mr. Ulufa‘alu's offer to resign was continuing late last night.

Minister for State Alfred Sasaako, explaining the Prime Minister's motives, said: "He has made it clear both to caucus and to Cabinet that he would be willing to resign if that was the price for peace in the Solomon Islands."

Resignation in the Solomons was complex, requiring a recall of Parliament, which was likely on June 16, Mr. Sasaako told ABC television.

Mr. Sasaako said Mr. Nori had withdrawn Monday's ultimatum against Mr. Ulufa‘alu and offered to reinstate normal security at the Prime Minister's residence.

He indicated he wanted the coalition to continue without the Prime Minister.

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