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By Paul Daley Foreign Affairs Correspondent

CANBERRA, Australia (September 8, 2000 - The Age)---The Federal Government is cautiously optimistic that talks between the leaders of Papua New Guinea and Bougainville will provide a lasting settlement for long-running tensions on the island and lead to a phase-out of the largely Australian Peace Monitoring Group there.

Foreign Minister Alexander Downer yesterday congratulated PNG Bougainville Affairs Minister Michael Somare and Bougainville leaders John Momis and Joseph Kabui for reaching a breakthrough in talks that have been held on the PNG island of New Britain.

On Wednesday the two sides overcame a major stumbling block to a lasting peace after reaching an understanding on the contentious issues of a referendum on the island's long-term political future, arms disposal and autonomy. The central government made a significant concession by agreeing to Bougainville's proposals on autonomy. The proposals include the provision for Bougainville to adopt its own constitution and to win increased political powers.

The central government also responded positively to the island delegation's proposal for financial arrangements -- including the power to tax -- to be ceded to the island. The Bougainville delegation is also seeking significant control over the island's abundant natural resources.

The central government said it was willing to consider a referendum on Bougainville's long-term future, which could include independence.

Mr. Downer said the issue of lasting peace on Bougainville was a serious foreign policy issue for Australia and the Federal Government had worked hard to achieve lasting peace there.

Mr. Downer said any further significant moves towards lasting peace would encourage Australia to phase out the Peace Monitoring Group, which is comprised of about 200 soldiers and civilians from Australia, New Zealand, Fiji and Vanuatu.

"We’ve said all along that the Peace Monitoring Group isn’t there for keeps," he said. "The Peace Monitoring Group is there for a temporary period. We are gradually downsizing the Peace Monitoring Group. It’s certainly been reduced in size over the past couple of weeks.

"We are looking next year at reducing the size of the Peace Monitoring Group even further. Frankly, we hope that the peace process will fairly quickly move to a point where it's no longer needed."

"I’m a little optimistic that that day will come. But there’s still a bit of a way to go, believe me. There’s still a lot of work to do in finalizing the details on both the autonomy package and on the question of the referendum."

Bougainville’s leaders, who want a period of autonomy leading to a referendum on independence, had originally insisted that PNG make its final offer by September 15 - the day before PNG celebrates 25 years of independence.

But a breakthrough in the talks this week is likely to result in Bougainville easing this demand.

For additional reports from The Age, go to PACIFIC ISLANDS REPORT News/Information Links: Newspapers/The Age.

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