EXILED southern Yemeni leaders warned of growing instability yesterday, and urged President Ali Abdullah Saleh to make peace with them.

Despite their defeat in the civil war three months ago - and the fact that several of them are wanted on charges of treason and war crimes - the seven exiles insist that circumstances will eventually force the president into dialogue.

Speaking in London before touring Arab capitals, Abd al-Rahman al-Jifri, who was vice-president of the short-lived Democratic Republic of Yemen, said high prices were a sign of the country's economic crisis. The sacking of 50,000 government employees last week would increase hardship.

"There will be a lot of trouble in Aden - either from our people or the fanatics,' he said.

Salem Saleh Mohammed, former deputy leader of the Socialist Party, said the president faced growing international pressure to negotiate.

An improvement in Yemeni-Saudi relations was essential for regional stability, he said. 'This won't be achieved unless the regime in Sana'a accepts our call for reconciliation.' Last week the exiles announced the formation of a National Opposition Front.

Their statement made no mention of the attempt last May to establish a separate state in Yemen. Instead, it said they would work for national unity.

Abdullah al-Asnaj, who was foreign minister of the breakaway state, said the group was seeking to work with other elements inside Yemen. "Peaceful resistance is the right course," he said. This conciliatory line contrasts with the threat of guerrilla resistance issued by southern leaders as the war ended.

Asked if their real objective was the removal of President Saleh, Mr Asnaj said: 'We want to see that a proper system of decent government is installed. We shouldn't allow a military sergeant to get hold of Yemen and deal with it as if it were part of his private property. This man says he is trying to stop corruption: he should start with himself.'