The offer was not enough for protesters in Sanaa, who promptly rejected it

Yemen's president has made a new offer to protesters demanding his exit, proposing he stays in office until elections are held but transferring his powers to a caretaker government, an opposition source said.

Ali Abdullah Saleh made his offer at a meeting on Tuesday night with Mohammed al-Yadoumi, head of the Islah party. It was the first time Saleh had dealt with Islah, once a partner in his government, an opposition spokesmen said.

"The opposition could pick a head of government of its own choosing and there would be parliamentary elections by the end of the year," an opposition source said of Saleh's offer.

The opposition promptly rejected the offer, with a spokesman calling it "an attempt to prolong the survival of regime". 

Weeks of protests by many thousands in Sanaa and other cities have sent Saleh's 32-year rule to the brink of collapse, but the United States and top oil producer Saudi Arabia, a key Yemen financer, are worried over who could succeed their ally.

They have long regarded Saleh as a bulwark of stability who can keep al Qaeda from extending its foothold in an Arabian Peninsula country that many see as close to disintegration.

Yemen's al Qaeda wing claimed responsibility for a foiled attempt in late 2009 to blow up an airliner bound for Detroit, and for US-bound cargo bombs sent in October 2010.

US officials have said openly they like working with Saleh - who has allowed unpopular US air strikes in Yemen against al Qaeda - and Saleh has said the US ambassador in Sanaa is involved in talks to find a solution.

Protests continue

Hundreds of thousands of anti-government protesters again packed the streets of several Yemeni cities on Wednesday to demand Saleh's ouster and denounce a munitions factory blast that left at least 100 people dead.

Monday's explosion was apparently set off accidentally after armed men described by residents as "religious extremists" seized the factory and nearby towns in the mountains southern province of Abyan, where al Qaida has been active.

The protesters blame Saleh for mismanagement, repression and the fatal shootings of protesters, and say they will not relent until he goes.

A coalition of opposition groups calling itself the Youth Revolution issued a statement saying they would not leave the large public space near Sanaa University until Saleh and his allies are removed from power.

"A temporary presidential council of five individuals known for experience and integrity should run the country for an interim period (of six months)," it said, adding the council should appoint a technocrat to form a caretaker government.

It also called for corruption trials, return of "stolen public and private property", release of political detainees, dissolving state security forces and closing the information ministry - steps taken in Tunisia and Egypt after similar pro-democracy uprisings had removed entrenched leaders.

They also called for dialogue over the complaints of Shias in the north and that of southerners who want to secede.

Source: Agencies