Sri Lanka President Chandrika Kumaratunga's party has formed an alliance with a Marxist group that opposes the wat Prime Minister Ranil Wickremesinghe is handling peace talks with Tamil rebels.
The president's Sri Lanka Freedom Party and the hardline People's Liberation Front (JVP) signed a memorandum of understanding Tuesday.
Analysts say the move raises the prospect of early parliamentary elections amid a deepening power struggle between President Kumaratunga and Mr. Wickremesinghe, who are elected separately.
The president, whose party lost parliamentary elections in 2001, triggered the power struggle by dismissing three cabinet ministers in November in a move that stalled the peace process with the rebels.
The JVP also has staged several demonstrations against the peace process, saying the government is conceding too much to the rebels.
Monday, the rebels' political leader - S.P Thamilselvan - warned that the political crisis in Colombo is also threatening the two-year old ceasefire between the rebels and the government.
Meanwhile, in another development, Reuters news service reports that the International Monetary Fund is delaying a key loan to Sri Lanka because of the country's political uncertainty.
Donor money to help rebuild Sri Lanka's war-ravaged northern and eastern regions is also tied to the resumption of peace talks with Tamil rebels.
Some information for this report provided by AFP and Reuters.