Ulufa'alu was accused of failing to address the ethnic problem

At least 60 people have been killed and thousands forced to flee their homes in the clashes between the Malaitan Eagles and another ethnic group, the Isatabu Freedom Movement (IFM).

The Isatabu, from the main island Guadalcanal, accuse settlers from Malaita island of taking over their land and jobs.

Reuters news agency reports that the rival militiamen, dressed in camouflage fatigues, have encircled Honiara for months, armed with homemade guns and weapons left over from World War II.

The country has no army to deal with such events and only a small police force, part of which is said to have sided with the rebels.

Rebel demands

The rebel leader, Andrew Nori, said Mr Ulufa'alu had been handed a letter asking him to step down and that he had agreed to hold a cabinet meeting to discuss "possible terms of reference for his resignation".

The Solomon Islands Broadcasting Corporation radio reported that Mr Nori wanted the prime minister to resign because his government had failed to address the country's ethnic crisis.

Solomon Islands: key facts

Population: 450,000 Spread over six large islands and many small ones Location: in South Pacific, northwest of Wellington and north-east of Sydney One of region's poorest countries and getting poorer Exports cocoa, copra, fish and timber Main partners: Australia and Japan History: former British protectorate

New Zealand Foreign Minister Phil Goff who also condemned the takeover, said that the rest of the Solomon Islands government was planning to meet later on Monday to discuss Mr Ulufa'alu's future as prime minister.

Mr Goff said that the islands' parliament also planned to meet on Tuesday to discuss the crisis.

He said that Mr Nori would meet Australian and New Zealand diplomats to explain his position.

Complete control

Mr Nori told a news conference that the militia had raided police armouries and were now in complete control of security.

All businesses and banks were closed in Honiara and all flights into Honiara had been cancelled for Monday and Tuesday.

The Solomon Islands: beautiful but poor

Latest reports said that the capital was under curfew.

The ethnic dispute in the Solomon Islands has been building up for years.

Guadalcanal militants are resentful of migration to their island by people from neighbouring Malaita island, who have taken key jobs in Honiara.

The Isatabu Freedom Movement has forced an estimated 20,000 people on Guadalcanal - mostly settlers from Malaita - to abandon their homes, jobs and properties and seek refuge with relatives in Honiara or on other islands.

The Malaita Eagles have been resisting the Isatabu militia.

Peace talks between the two sides broke down last week.