By Richard Lough

ANTANANARIVO, Aug 28 (Reuters) - Madagascar's leaders have failed to agree on who should lead a consensus government mandated with guiding the Indian Ocean island to fresh elections after months of political turmoil. [ID:nLS720521]

WHAT IS THE LATEST?

* Crisis talks between Madagascar's power-brokers in Mozambique have collapsed. After three days of fraught discussions, the Indian Ocean island's leaders failed to pick a consensus government tasked with restoring constitutional order on the world's fourth largest island.

* Lead mediator Joaquim Chissano, a former Mozambique president, called off the talks after it was clear Andry Rajoelina and the man he toppled in March, Marc Ravalomanana, were not prepared to shift from their hardline stances.

* Rajoelina, 35, has said it is inconceivable anyone else could lead the transition. Ravalomanana, who has been accused of abuse of office for private gain, categorically rejected Rajoelina's nomination as an insult to democratic principles.

WHY DID THE TALKS COLLAPSE?

* Agreeing to form a government of national unity -- as Rajoelina, Ravalomanana and former presidents Didier Ratsiraka and Albert Zafy did in Maputo on Aug. 9 -- was the easy part. The sharing of political office was always going to be tougher.

* Diplomats said Rajoelina's 30-strong delegation immediately raised alarm bells. Since the initial power-sharing deal, analysts have questioned whether Madagascar's leaders and their allies would put national interests above personal ambitions.

* Rajoelina's camp went to Maputo demanding both the presidency and the prime minister's office. On the table was a proposal to hand Rajoelina the top position if he conceded his delegation's demand for the premier's position too.

* Ratsiraka and Zafy backed the plan, but Rajoelina refused. Ravalomanana rejected Rajoelina for president and neither budged from their positions.

WHAT HAPPENS NOW?

* The Aug. 9 deal gave the four leaders 30 days to put a transition government in place [ID:nL9580205]. U.N mediator Tiebile Drame said on Friday there would not be a third round of talks in Maputo.

* Rajoelina has asked for more time to consult his allies on the issue of surrendering the prime minister's post.

* Mediators said they expected an email from the leaders by Sept. 4 on how all posts will be shared.

* The military, elements of which helped put Rajoelina in power, remain pivotal to what follows in the weeks ahead. The army has yet to react formally to the talks' collapse.

WHAT IF THE DEADLINE EXPIRES?

* The mediators refuse publicly to contemplate this scenario. The international community cannot enforce the deadline.

* Madagascar will top SADC's heads of state summit in the Democratic Republic of Congo next week.

* SADC and the AU suspended Madagascar after branding Rajoelina's power-grab a coup. Sanctions remain an option.

* Analysts have asked how much leverage the AU and SADC actually have over Madagascar's leaders. Rajoelina has frequently said he is prepared to turn to new partners to help develop the country.

* Some believe that behind the bullish rhetoric is a growing realisation within Rajoelina's camp that Madagascar cannot function without donor funding. The International Monetary Fund, the U.S. and European Union (EU) have all suspended aid worth hundreds of millions of dollars.

HOW DOES THIS AFFECT THE ECONOMY?

* This latest failure will do nothing to restore investor confidence. The political crisis alarmed foreign investors at a time falling commodity prices were forcing major foreign companies to review their business plans. [ID:nLG171138]

* Eight months of instability have cut economic growth on the resource-rich island and sent urban unemployment soaring. Rajoelina's interim government forecast growth at 5 percent this year. The IMF sees this as optimistic. [ID:nL81005787]

* A clear signal from Madagascar's senior politicians that they could work together would have reassured spooked tourists. The crisis has decimated the bio-diverse-rich island's $390 million-a-year tourism industry this year.

* A consensus government is central to Madagascar's continued membership of America's Africa Growth and Opportunity Act. The possibility of suspension threatens Madagascar's $600 million-a-year textile sector. Almost half of all clothing exports are to the United States. [ID:nLH725702]

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