Those differences have been mounting since Eritrea's 30-year war of independence resulted in the former Ethiopian province's de facto independence in 1991, followed by official independence in 1993, Meles said in an interview on Tuesday.

The stand-off began with pitched battles along the 1,000-kilometre (600-mile) border in May last year, giving way in June to an undeclared uneasy truce, but with hundreds of thousands of troops still dug in, and supported by artillery guns and tanks.

Ibrahim Dagash, the spokesman of the Organisation of African Unity (OAU), which is trying to impose a peace plan, noted Tuesday that the two Horn of Africa neighbours had more in common than they had differences.

Internationally, potential mediators have been trying for the past nine months to probe beneath the surface of a conflict which caused several thousand deaths in early battles for a few hundred square kilometres (miles) of rocky and unproductive terrain along the frontier.

Meles, for the first time, acknowledged in his interview with AFP that relations between the two countries had been at a particularly low ebb just before the fighting started.

Apart from the border problem, he said, "before May 6 we had many disputes on many subjects, very serious ones."

These problems ranged over political institutions, economic development, currencies, trade, foreign policy, and landlocked Ethiopia's use of Eritrea's Red Sea ports, Meles said.

Eritrea's independence created few immediate problems between Meles and Eritrean President Issaias Afeworki, who had allied to bring down the brutal Ethiopian regime of dictator Mengistu Haile Mariam in 1991, but the subsequent policies of their governments gradually widened a rift between the two countries, despite their tightly linked histories and economies.

Ethiopia chose a form of political liberalisation based on federalism and decentralisation, coupled with a market economy.

Eritrea, for its part, abandoned the Ethiopian birr and created its own currency, the nakfa, while maintaining centralised political power.

"We had categorically different visions," Meles said, "but all these issues could have been solved through negotiation."

Eritrea decided to resolve these problems by force, occupying the regions of Badme, in Ethiopia's northwest, and Zala Anbesa, in the north, Meles said.

He accused Asmara of believing force -- "shooting first and talking afterwards" -- was the fastest and surest method of resolving problems.

Ethiopian newspapers have recalled that Eritrean troops invaded the Red Sea Hannish islands in December 1995, but that last October an international court ruled they belonged to Yemen.

"We are facing a kidnapping," Meles said. "If we pay the ransom, they will ask for more. If we do something, we have to face the possible consequences."

For the prime minister, resolution of the dispute hinges on Eritrea's withdrawal to the positions they occupied before May 6 last year.

He is adamant that negotiations cannot begin until that happens.

Ethiopia has accepted the OAU plan, which envisages such a withdrawal, as well as the six-month deployment of a peacekeeping and observer force, and neutral delineation of the border, but Eritrea is still examining it as international diplomacy continues in a bid to prevent a resurgence of fighting.

The Ethiopian foreign ministry meanwhile issued a communique Wednesday urging the international communiocty to exert "real and tangible pressure" on Eritrea to accept the plan.

"Eritrea appears to have decided to stay put after having occupied Ethiopian territory , no matter what the international community says," the communique said.