By Patrick Markey
ALGIERS (Reuters) - Libyan politicians and activists resumed talks on Wednesday, aimed at forming a unity government to end the power struggle between two rival administrations that mediators fear could turn the North African country into a failed state.
Libya's neighbors and Western governments say the talks are the only way to resolve a conflict between the two governments and their armed forces battling for control of the OPEC oil producer where Islamist insurgents have exploited the chaos.
"To not reach an agreement and continue the confrontation is not an option," U.N. special envoy for Libya, Bernardino Leon, said at the talks in Algiers. "The country is really at its limit."
Tripoli is controlled by Libyan Dawn forces who set up their own unofficial government after taking the capital last year, leaving the internationally recognized government to operate out of the east of the country.
The talks, attended by political parties, activists, and representatives from Libyan regions, are meant to hammer out differences on a draft proposal for a unity government before a broader meeting expected in Morocco next week.
At the last talks in Morocco, the rival groups agreed on 80 percent of an accord and negotiators were working on the remaining 20 percent, U.N. officials said.
"This should be the final draft because may be this the final opportunity for Libya," Leon said. "It is a crucial time."
Abdulqader Al-Jwaili, a representative of the Tripoli parliament, told Reuters his delegation would attend Morocco talks planned for June 7-8.
Implementing any agreement on the ground may prove complicated in Libya where various rival brigades of former rebels battle each other on several fronts. Attempts at a ceasefire have generally failed in the past.
Four years after a NATO-backed uprising that ousted Muammar Gaddafi, the conflict has battered Libya's oil industry and also allowed Islamic State militants to gain a foothold in cities such as Derna and Sirte.
Both sides are under pressure as low oil production is quickly depleting government revenues that pay for salaries and food subsidies.
The growing Islamic State presence worries European countries concerned about militants establishing a strong base just across the Mediterranean.
Libya is also a concern for the EU as migrants fleeing strife in the Middle East and Africa use Libya's coast to launch boats to cross the sea to Europe.
(Additional reporting by Ahmed Elumami in Tripoli; Editing by Robin Pomeroy)