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Earlier, Zardari and Gilani held a crucial meeting at the Presidency and reviewed the decision to impose Governor's Rule in Punjab.
Buckling under intense domestic and international pressure, Pakistan President Asif Ali Zardari on Friday, decided to lift governor's rule in Punjab and allow the main opposition PML-N to form government in the politically-crucial province, local media reports said.
This came after the beleaguered Zardari was put on notice by the US, which reportedly gave him a 24-hour ultimatum to ease the simmering political crisis in Pakistan amid speculation that a deal brokered by Washington and the UK in consultation with the Pakistan army had been conveyed to the government.
After holding back-to-back meetings with Premier Yousuf Raza Gilani and army chief Gen Ashfaq Parvez Kayani, Zardari was ready "in principle" to end Governor's Rule in Punjab, imposed on February 25 after the Supreme Court barred PML-N leaders Nawaz and Shahbaz Sharif from holding elected office, Dawn News channel quoted official sources as saying.
However, there was no official word on the development.
Following his meetings with Gilani and Kayani, the president also decided to let Punjab Governor Salman Taseer convene the provincial assembly so that it could elect a new leader of the House from the PML-N, which is the single largest party there, the sources told the channel.
Zardari's change of stance comes after top Obama Administration officials put the squeeze on him to ease the political crisis as a showdown between ruling PPP and PML-N of Nawaz Sharif appeared imminent.
However, the Pakistan President was not prepared to show any "flexibility" on the issue of reinstating judges deposed by former President Pervez Musharraf during the 2007 emergency, the sources said.
They also said that the government could provide some "relief" to the Sharifs with regard to the court order barring
them from contesting polls or holding elected office.
The Sharif brothers have accused Zardari of influencing the apex court's verdict against them.
They have also said that the President is reluctant to reinstate former Chief Justice Iftikhar Muhammad Chaudhry as he fears that Chaudhry could scrap the controversial National Reconciliation Ordinance issued by Musharraf in 2007 to drop graft cases against PPP leaders, including Zardari.
Earlier, Zardari and Gilani held a crucial meeting at the Presidency and reviewed the decision to impose Governor's Rule in Punjab.
A statement issued by the presidency said Zardari also met Kayani and discussed the "regional security situation and professional matters."
The powerful army chief met Gilani as well to discuss the situation.
During the Zardari-Gilani meeting, the long march launched on Thursday by the lawyers' movement and opposition parties, and political tensions also came up for discussion.
The meeting followed reports that a deal backed by the US, UK and Pakistan's army had been "quietly" conveyed to Gilani.
As part of the deal aimed at bringing down the political temperature, Gilani was "given 24 hours to convince Zardari into agreeing to the new political and constitutional arrangement", The News daily said.
Pakistani authorities earlier blocked all major highways leading to the capital to prevent the long march demanding reinstatement of sacked judges from reaching here.
Police and paramilitary forces blocked another group of activists marching from Balochistan's capital Quetta to Sukkur in Sindh and arrested the Supreme Court Bar Association president Ali Ahmed Kurd along with some others.
The police action followed yesterday's incident when authorities arrested dozens of lawyers and political activists when they stopped a motorcade on way to Sukkur from Karachi.
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