The simmering political crisis in Pakistan on Monday blew over, with former prime minister Nawaz Sharif [Images] calling off the long march, after the government buckled and announced the reinstatement of deposed Supreme Court Chief Iftikhar Muhammad Chaudhry.

The announcement came early today morning with Prime Minister Yousuf Raza Gilani [Images] announcing the government's decision to reinstate Justice Chaudhry, who was dismissed by then President Pervez Musharraf [Images], after the imposition of emergency in 2007.

Former premier and Pakistan Muslim League-N chief Nawaz Sharif, who defied house arrest on Sunday and was on a long march along with his supporters for a mass sit-in outside the Parliament in Islamabad [Images], called off the protest and hailed the government's announcement as a victory.

Gilani's announcement today came on top of the government's decision on Saturday to file a review petition challenging the Supreme Court's order barring PML-N leaders Nawaz and Shahbaz Sharif from electoral politics.

"In keeping with the promise made by the President and me, I announce the restoration of all deposed judges, including Chief Justice Iftikhar Muhammad Chaudhry, to their posts," Gilani said in a televised address to the nation.

Chaudhry will assume the post of Chief Justice once current incumbent Abdul Hamid Dogar retires on March 21. "A notification to this effect is being issued now," Gilani said.

In his address, Gilani said democracy and democratic institutions could not be strengthened if political parties did not respect each other's mandates. The Pakistan People's Party, he said, would continue to address the people's problems and to ensure the sovereignty and security of Pakistan.

Sharif had led thousands of protestors through the streets of Lahore [Images] on Sunday in a massive show of strength, adding to the isolation of the Pakistan People's Party and its co-chairman, President Asif Ali Zardari [Images]. Gilani invited the PML-N to work with all other political forces for the implementation of the 'Charter of Democracy', a document signed by the PML-N and PPP in 2006, to strengthen democracy in the country.

He directed provincial governments to lift prohibitory orders banning rallies and protests that were imposed when the lawyers' movement and opposition parties launched the 'long march' on March 12. Gilani also directed authorities to release all persons arrested during the protest.

The prime minister recalled that slain PPP chairperson and former premier Benazir Bhutto [Images] and President Zardari had both pledged to reinstate Chaudhry. However, this could not be done when the PPP formed its government after last year's general election as Dogar had already been appointed as the Chief Justice, he said.

He noted that Zardari had also said that no sitting judges would be disturbed while reinstating the deposed judges. However, as Dogar was retiring on March 21, Gilani said he and the President had decided that the time had come to fulfill the promise to reinstate Chaudhry.

The stand-off between Zardari and Sharif had escalated into a major political crisis that threatened to destabilise Pakistan at a time when the government is grappling with a growing Taliban [Images] insurgency and economic problems.

The government's decision to reinstate Chaudhry came after a flurry of meetings at the Prime Minister's residency and the Presidency that continued well past midnight. Army chief General Ashfaq Pervaiz Kayani too met Gilani and Zardari to discuss efforts to resolve the political crisis.

Gilani and Zardari discussed the prevailing political situation and agreed on restoring the deposed judges, during a meeting that lasted for over two hours late on Sunday night.

After the meeting with Gilani, Zardari summoned his political advisors to discuss the situation. Islamabad had witnessed hectic political and diplomatic activity over the past few days, with the United States and Britain mounting pressure on both the PPP and PML-N to resolve their differences, before the 'long march' triggered widespread public unrest.

Hundreds of lawyers, civil society activists and political workers held celebrations outside Chaudhry's residence at the Judges Colony in Islamabad after Gilani announced his reinstatement. Chaudhry offered special prayers of thanks on hearing the news.

People beat drums and danced as hundreds of people thronged Chaudhry's residence to congratulate him. The security around his house was tightened.

Chaudhry will return to the post of Chief Justice over 16 months after he was sacked by Musharraf for not endorsing the emergency.

Chaudhry was appointed Chief Justice by Musharraf in May 2005. The independent-minded Chief Justice irked Musharraf after he initiated suo moto action against several of the former military regime's actions.

Musharraf suspended Chaudhry on March 9, 2007 after leveling a variety of allegations against him but he was reinstated on the order of the Supreme Court on July 20, 2007 after countrywide protests. On November 3, 2007, Musharraf declared a state of emergency and sacked Chaudhry.

Dogar was sworn in as the new Chief Justice and Chaudhry was put under house arrest. He remained in detention till the PPP formed its government in March last year.