The Philippine government has withdrawn from peace talks with Muslim rebels two days after an attack on a southern town that killed at least 27 people. This is the latest setback in efforts to restart stalled negotiations over the country's 30-year-long Muslim insurgency.

The peace talks were due to start in the Malaysian capital, Kuala Lumpur, on Friday. But Philippine President Gloria Macapagal Arroyo now says talks with the Moro Islamic Liberation Front, or MILF, will have to await what she called "more auspicious circumstances."

Her decision follows an attack by the MILF Sunday in Siocon town on the island of Mindanao, which killed at least 27 people - most of them civilians. The rebel group acknowledged responsibility for the attack, saying it was part of its "defensive" strategy.

It was the second such attack in the South in as many weeks and one of the most violent since a ceasefire agreement collapsed in February.

The Malaysia talks would have been the second attempt this year to restart peace negotiations aimed at ending 30 years of separatist fighting in the South. There were low-level talks in March, which also failed because of the continuing violence.

Since then, there has been an escalation of violence in the South - including two deadly bombings - which police say was jointly planned by the MILF and the regional terrorist group, Jemmah Islamiyah.

The MILF wants to establish an Islamic state for the country's Muslim minority.

Some analysts say that even if hostilities end, the peace process may not move forward unless both sides to implement a series of previously agreed rehabilitation, humanitarian and development programs.

"I think the best way for the government and the MILF to push through with the peace process is to implement mini-agreements that they have signed, rather than talk and talk," says Abhoud Syed Lingga, director of the Institute of Bangsamoro Studies, a think tank in the South. "If only both parties could honor - no matter how little, how simple - the agreement, that is the best way of building trust."

Despite the cancellation of the latest meeting, the MILF said Tuesday it is still willing to talk with the government.