ZIMBABWE'S opposition Movement for Democratic Change has decided to dance with the devil that is Robert Mugabe, indicating it will begin negotiations with the disgraced leader on a form of power-sharing to end the political stalemate that is crippling the country.

Sceptical Zimbabweans call this year's tortured election process their "harvest of thorns" and many fear the movement's agreement to "talk about talks" with the ZANU-PF party will hand Mugabe the building blocks to restore his shattered credibility in Africa, if not further afield.

But Eddie Cross, the movement's policy co-ordinator, describes the new memorandum of understanding, which reportedly was due to be signed as early as last night, as "a full climb down by Mugabe and his cohorts made even more significant by the fact that nowhere does it mention that Mugabe is the president".

He told The Zimbabwe Times that the movement had won the right to broaden the mediation team, with representatives from the African Union and United Nations joining the South African president, Thabo Mbeki.

The United Nations special representative to Zimbabwe, Haile Menkerios, said the agreement by the two negotiating parties on a draft memorandum of understanding, which establishes the ground rules for the talks, was "at least a first step". Now the two principals, Mugabe and Morgan Tsvangirai, must sign it. After that, talks are expected to begin in Pretoria, South Africa, very quickly.

The breakthrough comes as the Reserve Bank of Zimbabwe issued a new $Z100 billion note and the official inflation rate hit 2.2 million per cent. Unofficial estimates suggest it may be five times that. Eighty per cent of Zimbabweans are now thought to be living below the poverty line, with a loaf of bread costing 30 per cent of a teacher's monthly salary.

Mugabe says he won the presidential election run-off on June 27 unopposed after the movement's frontrunner, Tsvangirai, withdrew five days before the poll to spare his supporters further violence. In the 12 hours before he made that decision, six party members had reportedly been beaten to death. More than 120 movement members have been killed since Mugabe unleashed a campaign of terror on grassroots organisers after the first round of presidential voting in March.

The Minister for Foreign Affairs, Stephen Smith, told the ABC: "If all that can be achieved is a political dialogue between Mr Tsvangirai and his party, and Mr Mugabe and his party, and that results in a shared arrangement then that would at least be some, off a very low base, some progress."

Cross says the talks give reason for hope and show "ZANU-PF is at the end of the road".

However, anyone who watched Mugabe unfurl his campaign of murderous retribution against Zimbabwe's voters after they rejected him in March knows he will do anything to stay in power, and these talks may well be one more act in his power play.