PANAMA CITY (Reuters) -- Panama's ruling Arnulfista Party (AP) lost control
                  of the 71-seat National Assembly on Friday as former center-party allies deserted
                  to opposition ranks on the legislature's first day back from recess.

                  Two Christian Democrat Party (PDC) legislators, who had previously
                  participated in a fragile coalition giving the government a one-vote majority in the
                  single chamber legislature, joined forces with the opposition Democratic
                  Revolutionary Party (PRD).

                  Following a deal brokered with former PDC rivals last week, the PRD alliance
                  now holds the balance of power in the Assembly, with 37 votes to the
                  government's 34.

                  "It's an agreement that will permit governability ... and will profoundly transform
                  parliament," PRD second secretary Miguel Bush told Reuters.

                  It would allow the opposition to modify government legislative proposals and
                  advance its own program, he added.

                     Copyright 2000 Reuters. All rights reserved. This material may not be
                             published, broadcast, rewritten, or redistributed.