Will power sharing in Zimbabwe work, and is it time to lift sanctions?

World leaders applauded on Wednesday Morgan Tsvangirai's appointment as Zimbabwe's prime minister but were wary of a rocky road ahead with President Robert Mugabe still in power.

The European Union said the new government, which must tackle 94% unemployment and a largely starving population, would have to prove itself before receiving major economic aid.

"We are ready to support the economic and social recovery of Zimbabwe once the new government shows tangible signs of respect for human rights, the rule of law, and macroeconomic stabilisation," the bloc said in a statement.

Former colonial power Britain said Tsvangirai "and his team have a formidable challenge in bringing legitimacy and reform to Zimbabwe's government."

However, Foreign Secretary David Miliband did say the appointment of the 56-year-old opposition leader as Zimbabwe's new prime minister offered "the possibility of a change for the better".

British Prime Minister Gordon Brown told Tsvangirai that repressive legislation needed to be lifted and new elections held before Zimbabwe would be seen as "an ordinary country."

"Until the government of Zimbabwe could convince us that there were going to be free and fair elections, and at the same time that there was going to be the removal of repressive legislation ... until these things happened, we could not treat Zimbabwe as if it was an ordinary country."

He added: "I hope there will be considerable pressure by the international community to release political prisoners, to get in a credible team to deal with the finances, to have a clear roadmap to the next elections."

These are the indicators of change that we will be looking for.

"But he warned: "I fear that President Mugabe will still stand in the way of these changes."

United Nations Secretary General Ban Ki-moon hailed Tsvangirai's swearing-in but urged him to address critical problems right away.

President Barack Obama has extended his congratulations to Zimbabwean opposition leader Morgan Tsvangirai for becoming the country's prime minister.

However Obama was quick to say that his administration was waiting to see evidence of true power sharing and effective governance before offering additional development assistance or easing its targeted sanctions against President Robert Mugabe and his key supporters.

The United States, like other Western donors, said it was too early to be overly optimistic. Acting State Department spokesman Robert Wood said the United States is reserving judgment on the new government.

"We need to see evidence of good governance and particularly real, true power-sharing on the part of Robert Mugabe before we are going to make any kind of commitment ... to provide further development assistance or to easing sanctions," State Department acting spokesperson Robert Wood told reporters.

"That's going to be key. And then we'll see what ... we can do," he said.

The European Union also has sanctions on Mugabe and his inner circle.

EU foreign ministers had recently tightened sanctions on Zimbabwe, freezing the assets of companies based in British tax havens for the first time and adding 26 more names of people close to the Mugabe regime or their families to a travel-ban list, bringing the number to 203.

The amount of companies whose assets in Europe must be frozen was increased sharply from four to 40 and for the first time European-based firms are included.

According to EU sources, all 18 of the European company names added are based on British territory, including tax havens Jersey, the Isle of Man and the British Virgin Islands,

South Africa, which has seen an estimated three million people cross the border into its territory during the crisis, described the moment as an "important milestone" for national healing.

"South Africa and indeed the entire region stands ready to support the people of Zimbabwe morally, politically and economically as they embark on this difficult path of reconstruction and development of their country," President Kgalema Motlanthe said.

Tsvangirai's swearing-in on Wednesday caps nearly a year of turmoil that began last March.

South Africa brokered a unity government deal, which was signed last September but stalled for almost five months amid protracted talks on how to distribute Cabinet posts and share control of the security forces.

During that time, the situation in Zimbabwe only got worse.

More than half the population now needs emergency food aid and only 20% of children go to school because teachers have not been paid and exams not graded.

Public hospitals are closed, with doctors and nurses unpaid, exacerbating a health crisis in a nation where 1,3-million people have HIV and cholera has hit nearly 70 000 people since August, killing about 3 500.

Zimbabwe's new Prime Minister's success or failure could be clear within 10 days.

The first litmus test will be the sacking of Gideon Gono, the man who has bankrolled the Mugabe regime from his post as head of the central bank. "Clearly he's got to go," said the source. "Otherwise there will be no coherence on the economy and the international community won't give us the time of day." Mr Gono is one of the main figures blamed for the hyperinflation that has rendered Zimbabwe's currency worthless. With unemployment running at 94 per cent and many public servants on strike for a living wage, Zimbabwe needs a massive injection of foreign aid. But few, if any, countries will be willing to commit funds without a clear change of the guard. Britain's Foreign Secretary David Miliband said increased aid would "depend on the new government's actions".

The Zimbabwe cabinet source said he expected Mr Gono would be fired early next week along with the attorney general. There would be serious consequences, he said, if it doesn't happen in that timeframe. "Clearly we've got to move very fast. If we don't pay the army next week then we're in big trouble," he added.

After the swearing in, Mr Tsvangirai pledged to swiftly pay civil servants in foreign currency to "get the country back to work". Other key demands from the Movement for Democratic Change (MDC) include the release of political prisoners and an immediate "end to land invasions and restoration of the rule of law".

The starting point for Zimbabwe is far worse than it was for Kenya a year ago. It has had its worst harvest since independence and a cholera epidemic has killed 3,500 people. Mr Mugabe's inner circle still controls the military and the police, and hundreds of political prisoners languish in jail.

Zimbabwe's villains and victims

Tendai Biti
A gifted young lawyer among the founders of the MDC, he has been one of the most vocal critics of Mugabe. Arrested and beaten and most recently charged with treason he is now the finance minister and tasked with clearing up the mess created by years of looting and mismanagement.

Roy Bennett
White farmer who took on and beat a Zanu MP at the start of the land invasions despite being beaten up. Famously wrestled Zanu MP Patrick Chinamasa to the ground in parliament after being goaded over the seizure of his farm. Jailed for 8 months and left for South Africa after release. Now back in Harare as a deputy minister.

Elias Mudzuri
Was threatened, beaten up, suspended and locked out of his office after winning election to become mayor of Harare. Had to contend with Zanu youth who surrounded town hall chanting "Mudzuri should be beaten up, he must be killed and he must be removed." A trained engineer he was yesterday appointed as energy minister.

Patrick Chinamasa
Main architect of Mugabe's subversion of the legal system he has fired or intimidated judges who refuse to toe the line. A voracious collector of stolen farms, his wife seized a tobacco farm then pocketed international award for its record crop. Lost his seat at last year's election but expected to be named in cabinet.

Perence Shiri
Spearheaded the Gukurahundi massacres in Matabeleland in the 1980s. Leading voice in Joint Operations Command, clique used by Mugabe to violently control the country. Nicknamed Black Jesus. Planned and carried out terror campaign against opposition after March 2008 election defeat. Retained as head of Zimbabwe's airforce.

Gideon Gono
The man who printed money to meet needs of Mugabe regime and bankrupted the country. The ageing autocrat's personal banker has sanction use of reserve bank where he's governor as piggy bank for party elite. Has seen inflation reach into sextillions while acquiring more than 70 houses including Harare mansion larger than Mugabe's.

The Big Question: Will power sharing in Zimbabwe work, and is it time to lift sanctions?

While African leaders want them lifted, many think this would be a very bad idea. Most of these sanctions are targeted at travel to halt members of the regime from pursuing lavish spending in America and Europe. And there remains a fundamental issue: the unity government agreement does not confer legitimacy on Mr Mugabe after he lost the first round of balloting in both presidential and parliamentary elections last March. And since the President is illegitimate, the sanctions against him should remain.

So can Mugabe and Tsvangirai co-operate?

Yes...
* Provided Mugabe uses it to find an escape route into retirement and thus leave Tsvangirai in charge

*Provided Tsvangirai gives immunity to Mr Mugabe against future prosecution for human rights abuses

* Provided African leaders find money to bankroll Zimbabwe's recovery in place of Western aid

No...
* The policy differences are vast, and they will not be able to agree on questions of law, and investment

* Mugabe's violations of the agreement thus far bode ill. He is not minded to loosen his grip on power

* Similar agreements in the past have only resulted in Mugabe swallowing up or destroying the opposition