Ravalomanana rejected the official results

The agreement was signed in Senegal, where the two rivals have been holding peace talks mediated by African leaders.

More than 35 people have been killed in a conflict which has left Madagascar with rival governments, two capitals and splits in the armed forces.

On Wednesday, the Madagascar Supreme Court annulled the officially announced election result, which gave neither candidate an outright win, and ordered the authorities to re-examine it.

Concessions

The accord signed in Dakar notes that if no clear winner emerges after the recount, a referendum will take place in the next six months, held with the assistance of the United Nations and the Organisation of African Unity.

More than 35 people have been killed

The population of Madagascar will again face a straight choice between Mr Ratsiraka and Mr Ravalomanana.

In the interim, Mr Ratsiraka retains the presidency of Madagascar, but there will be substantial concessions for his challenger.

Mr Ravalomanana will head a higher council of transition which will supervise the work of a transitional government of national reconciliation.

Mr Ravalomanana will have the right to choose the minister of interior and the minister of finance in that administration, while the two leaders will have to agree on a mutually acceptable prime minister.

The agreement calls for an end to all violence in Madagascar. Roadblocks are to be removed, and the security of people and property respected.

"That pill will be very difficult to swallow for the hundreds of thousands who sacrificed themselves to back [Ravalomanana] during the daily protests and general strike," one foreign observer said.

"We're worried that extremists in both camps who don't want an agreement will try some last-minute provocation," a political analyst said in relation to the lifting of roadblocks.

Supporters of Mr Ratsiraka based in the port city of Tamatave have imposed an economic blockade on the capital, Antananarivo, which is controlled by Mr Ravalomanana.

This has led to shortages of fuel and essential commodities in Antananarivo.

Rising violence

The conflict has grown increasingly bloody in recent weeks.

Ratsiraka said he remained a pragmatist

Earlier this week three people, including a general loyal to Mr Ratsiraka, were killed in the key town of Fianarantsoa, south of Antananarivo.

And at the weekend, five soldiers died and 18 others were injured in a struggle for control of the town.

Last week, one person was killed and about 40 others were wounded in clashes in the northern town of Mahajanga.