Ukraine faced its most serious political crisis since the Orange Revolution today as Parliament was ordered to dissolve in the midst of the deepening conflict between the country's President and Prime Minister.

Thousands of supporters loyal to Viktor Yanukovych, the Prime Minister who was defeated by President Viktor Yushchenko in the re-run elections two-and-a-half years ago, streamed into Kiev to set up a tented camp today to protest after Mr Yushchenko ordered snap elections last night.

They have described the decision, which came after seven hours of negotiations failed to produce a compromise between the President and Mr Yanukovych's ruling coalition, as an attempted coup. Supporters of Mr Yushchenko, meanwhile, are planning to erect a stage in Kiev's Independence Square and revisit the site of their peaceful uprising in late 2004.

Today the protesters waved flags and chanted support for Mr Yanukovych, who said the President had committed "a fatal mistake" by ordering new elections. The two men are scheduled to meet face to face later today.

The open confrontation between the two sides follows the breakdown of the relationship between Mr Yushchenko and parliament since Mr Yanukovych was appointed Prime Minister last August.

Mr Yanukovych, Moscow's favoured candidate in the rigged elections that prompted the Orange Revolution, and his Regions Party secured their political comeback last year after the coalition of Western-leaning parties that formed the backbone of the protests fell apart.

Since reluctantly nominating him as Prime Minister, Mr Yushchenko has accused Mr Yanukovych of illegally persuading MPs to join his coalition and strengthen his grip on the 450-seat Parliament. The President claims that only entire factions can change sides in the assembly, rather than individual legislators. Eleven MPs deserted Mr Yushchenko last month.

Last night, Mr Yushchenko said that he had been forced to call fresh elections because parliament was violating the constitution and trying to strip him of his authority. “My actions were prompted by a crucial need to preserve the the state, its sovereignty and territorial integrity,” he said.

The order became official when it was published today in the national gazette and the date for the elections was set for May 27.

But this morning Mr Yanukovych said parliament would continue to meet until the constitutional court had ruled the decision was legal. MPs have also threatened to withhold the money needed to run the elections and fired the officials of the Central Elections Commission.

The stand-off has raised the prospect of a full-blown constitutional crisis. Last night, Mr Yanukovych did not say that he would openly defy the President but hinted at trouble to come. “I will not speak aloud of a third option," he said. "That would boost tension greatly... The President would be fully responsible for the heavy burden.”

At a stormy cabinet meeting, Ukraine's Defence Minister, Anatoly Grytsenko, one of Mr Yushchenko’s two supporters in the Government, said the Ukrainian army would follow the President's orders if the crisis worsens.

Meanwhile, reports from Kiev today described buses and trains with supporters of Mr Yanukovych on board arriving in the capital from the Russian-speaking east of the country. The bulk of Mr Yushchenko's supporters, and those of his once-ally and pro-Western Prime Minister, Yulia Tymoshenko, live in the west of the country.

Russia and the US have appealed for calm from both sides as economic analysts have given warning that political instability is likely to harm Ukraine's growth prospects this year. The country's Finance Minister, Mykola Azarov, said today that GDP was expected to grow 6.5 per this year after 11.5 per cent in 2006.

Analysts said the decision to dissolve Parliament had left the country open to uncertainty but that the contest between Mr Yushchenko and Mr Yanukovych reflected Ukraine's inherently divided political landscape, in which it was better for neither side to be completely dominant.

"It is essential that Ukrainian political pendulum regains its equilibrium, preferably through a negotiated solution between the competing political forces," said Natalia Leshchenko at Global Insight. "Yet, the timing and methods of resolution of the current crisis are yet to transpire."

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