HARARE (Reuters) - Zimbabwe's President Robert Mugabe and opposition leader Morgan Tsvangirai on Monday signed a deal laying down the framework for formal talks on forming a power sharing government to end a deep political crisis.

It was the first meeting in 10 years between the two rival leaders, who are widely believed to detest each other. They sat at a conference table separated by South African President Thabo Mbeki who mediated the deal.

The preliminary agreement was signed in Harare's Rainbow Towers Hotel after weeks of deadlock since Mugabe was re-elected on June 27 in a widely condemned poll boycotted by Tsvangirai because of violence against his supporters.

Mbeki said the agreement committed both sides to an intense process to try to complete substantive negotiations as quickly as possible. "All parties recognise the urgency," he said.

A subdued Mugabe said after the signing that the agreement was "to chart a new way of political interaction."

Tsvangirai called the ceremony "a very historic occasion" and stressed that a solution must be found.

"If we put our heads together, I am sure we can find a solution. In fact, not finding a solution is not an option," he said.

Officials from both sides said the framework agreement sets a two-week deadline for the government and two factions of the opposition MDC to discuss key issues including a unity government and how to hold new elections [see text].

A government of national unity has been pushed as a solution to the crisis by the African Union and the regional body SADC (Southern African Development Community), both deeply concerned by Zimbabwe's political violence and an economic crisis that has flooded neighbouring states with millions of refugees.

Tsvangirai's MDC (Movement for Democratic Change) and Mugabe's ZANU-PF are also committed under the agreement to ease political tension within the two-week deadline, officials said.

One analyst said there were still wide differences between the MDC and Mugabe's ruling party which needed to be overcome.

"This represents a small step in terms of the overall picture of moving towards negotiations," said Mike Davies, an analyst at Eurasia Group.

"We would still see that there are wide differences between the positions of the MDC and ZANU-PF that will have to be overcome if there is to be any negotiated solution to the crisis. Some of the differences are so entrenched it is difficult to see how they could be resolved quickly," he added.

Mugabe and Tsvangirai have been under heavy world and African pressure to enter negotiations, which are expected to be extremely tough. They have both demanded to be recognised as Zimbabwe's rightful president.

Mugabe called for an end to Western sanctions against him and his ruling circle and said there was no need for intervention from Europe in Zimbabwe. He has frequently called Tsvangirai a puppet of former colonial ruler Britain.

Zimbabwe's economic collapse under Mugabe's 28-year rule has plunged the once prosperous country into inflation of at least 2 million percent as well as crippling food and fuel shortages.

Tsvangirai had previously refused to sign even a framework deal unless government militias stop violence he says has killed 120 of his supporters. He also wanted Mugabe to recognise his victory in the first round of the presidential poll on March 29.

The MDC leader pulled out of the run-off because of the violence between the two rounds.

Mugabe, 84, blames the opposition for the bloodshed.

The turning point in ending the deadlock appeared to be a meeting last Friday between Mbeki, the African Union's top permanent official, Jean Ping, and U.N. envoy Haile Menkerios.

Mbeki, who has up to now negotiated alone as the designated regional mediator, agreed to expand the mediation process to include the African Union, United Nations and officials from the Southern African Development Community in a "reference group".

Mbeki is expected to liaise with the group although it will not be directly involved in negotiations.

Expansion of the mediation beyond Mbeki has been a key demand of Tsvangirai, who has strongly criticised the South African president, accusing him of favouring Mugabe.

"The actual negotiations are going to be a lot tougher and the MDC's aim of easing Mugabe out of power or sharing executive power (with ZANU-PF) in a transitional government ahead of another election is going to be more difficult to get," said Eldred Masunungure, a political science professor at the University of Zimbabwe.