A top Iranian official said on yesterday President Mohammad Khatami and his reformist cabinet were ready to quit but later made clear he was reiterating a resignation threat government officials made last week.

Vice-President Mohammad Ali Abtahi told reporters many ministers and vice-presidents had handed in their resignations over a hardline ban on liberal candidates standing in parliamentary elections and Khatami could lead a mass walk-out.

But speaking later to Reuters by telephone, Abtahi said his remarks repeated the threat made by senior government officials last week and comments by Khatami that reformists should either stick together or leave together.

?It?s nothing new. The resignation letters were submitted last week,? he said.

Khatami and his allies have made repeated resignation threats in recent years in response to moves by unelected hardliners to block their efforts at reform.

Other officials played down talk of a political crisis and said they were optimistic a dispute over the disqualification of thousands of parliamentary candidates would soon be resolved.

?The talks are ongoing and we are very hopeful it will be resolved,? said one minister, who is among roughly 16 cabinet members who have submitted their resignations.

Abtahi stressed the election row could still be defused if the hardline Guardian Council, which has barred almost half the 8,200 hopefuls from running in the February 20 vote, followed the advice of Supreme Leader Ayatollah Ali Khamenei who has urged a thorough revision of the disqualifications.

?The framework set by the Supreme Leader is very good and can save the country from the crisis,? he told reporters.

Khatami, who was due to address the World Economic Forum in Davos, Switzerland, later on Wednesday, told reformist politicians in a letter on Tuesday he was optimistic about the chances of a fair election.

Talks ongoing</B>