The letter from Micheletti's team also proposed creating a truth commission to "let the Honduran people and the international community see all the acts that led to the current situation".

Zelaya was overthrown in a military coup last month and went into exile, with Micheletti taking over as the country's de facto president.

'Unity and amnesty'

Sunday's talks, in the city of San Jose, opened a day after nearly 10 hours of closed-door meetings failed to yield any kind of agreement.

The Costa Rican president's proposal to the two parties included a national unity government headed by Zelaya, a general amnesty and early elections.

Zelaya described the talks as the last chance for reaching a deal to reinstate him and has threatened to return to Honduras in secret and attempt to retake power on his own if no agreement is reached.

Zelaya's aide, Allan Fajardo, said the ousted president planned to return before Friday, the date suggested by Arias for his return.

The Honduran military thwarted an earlier attempt by Zelaya to fly home on July 5 by blocking the runway at the airport in the capital, Tegucigalpa.

Proposed plan

In a statement on Saturday, Arias proposed Zelaya serve out the final months of his term, move up elections by one month to late October and include representatives of the main political parties in a reconciliation government.

He said Zelaya would have to cede control of the military to an electoral court a month before the elections to ensure impartiality.

Arias, left, issued a proposal that suggested Zelaya serve out the rest of his term [AFP]
 
Zelaya would also have to renounce his plan to hold a referendum on amending the constitution, which was the spark that launched the coup after the Supreme Court, military and Congress all objected to the vote.

Enrique Flores, a Zelaya representative, said the ousted president's side had accepted Arias' plan "in principle".

But Martha Lorena Alvarado, the interim assistant foreign minister, when asked about the idea of having Zelaya return to Honduras as president with a reconciliation government, said such a proposal was "impossible".

Her comment in Honduras' capital, Tegucigalpa, was the clearest indication that the talks had deadlocked.

"The reinstatement of Zelaya, as we have maintained and now repeat, is not negotiable ... there is no possibility of him returning to Honduras as president," Alvarado said.