The coup regime today introduced a counter-proposal, which would not have allowed for President Manuel Zelaya's return to the presidency, but would have allowed his return to Honduras, to be tried and imprisoned for alleged constitutional violations.

[snip]

President Zelaya's delegation reaffirmed their commitment to the mediation process and verified they had accepted the 7-point proposal from Arias as a point of debate, particularly point 1, the restitution of Manuel Zelaya to the presidency of Honduras.Even President Oscar Arias - the mediator (via Washington) - confirmed that point 1 was the essence of the entire negotiation.

The Zelaya delegation declared the talks as "failed" and "over", but Arias called for another 72-hours to work on a solution that will prevent a civil war from erupting in the Central American nation. "Give me another 72 hours to work tirelessly on a solution, in order to avoid bloodshed", Noble Peace prize winner Arias said before the international media that were anxiously awaiting the outcome of today's meetings outside the presidential residence in San José de Costa Rica.

Zelaya obviously has given up the dream of becoming the Honduran Chavez.

Strange though, because Micheletti's government will be ostracized by the OAS. Really strange, especially after getting basically everything he wanted.

Can't for the life of me understand why the U.S. is backing Zelaya.  He wanted to change the Constitution by force in order to stay in power like Chavez and Castro.

If you accept that this premise, it's clear that the Arias proposal offers the military nothing (not even immunity).  The military will never be in a stronger position vis-à-vis Zelaya  than they are today.  Zelaya will never be in a weaker position than he is now.  Surely both sides must assume that Zelaya will be working from the moment he returns to office to improve his position and increase his forces in preparation for the moment when he is supposed to leave office but will instead arguably take his revenge and consolidate his power. Perhaps, if he can build his forces strong enough and quickly enough, he can launch a preemptive strike at a time of his choosing.

By contrast, the military or the Junta (however you choose to call them) cannot improve their situation during the remaining year of Zelaya's term---they will never have greater forces or more domestic support than they have right now.  So, by accepting this deal the Junta gives up what it has (total power) in return for a gamble in which if they win they get back what they have now but nothing more.  And if they lose, they and their families will surely be executed.  Clearly, the deal offers them nothing.

The rights and wrongs of how they got where they are aside, the military would have to be fools to take this deal.   The status quo ante is gone and cannot be restored by agreement----just as in the book "The Godfather" the agreement to end the war was a sham----things had gone too far for such an agreement.  Only the total destruction of one of the opposing forces would end the war.

Talks on resolving end Honduras' leadership crisis have ended after negotiators failed to compromise on ousted President Manuel Zelaya's return to power.
Costa Rican President Oscar Arias says he'll continue to mediate between the two sides for another three days in search of a solution.

But the two camps are far apart in their positions.

Carlos Lopez, a representative of the interim government, says it is "unacceptable" for Zelaya to return to the presidency, as proposed by Arias.

Meanwhile Zelaya told The Associated Press on Sunday that he's willing to leave "the door open for diplomacy and dialogue."[emphasis added]

FOX

Seems the logical compromise. I wonder what is behind this refusal. Zelaya obviously has given up the dream of becoming the Honduran Chavez.

The coup and the "compromise" are not about preventing a "Honduran Chavez".

As the WSWS writes today:

The mediation by Arias is designed to legitimize the coup and consolidate its main aims. Before talks broke down, Zelaya reportedly agreed to abandon his call for a referendum on a constitutional convention, the main pretext for his ouster.

In accepting Arias's terms, Zelaya was also reported to have agreed to a total amnesty for the military and political figures who carried out the June 28 coup and to the repressive forces that assaulted, arrested, beat and in some cases murdered workers and peasants protesting Zelaya's removal.

While the Obama administration formally condemned the coup, Secretary of State Hillary Clinton commissioned the mediation effort by Costa Rican President Óscar Arias--one observer compared it to the police demanding that a rape victim sit down and compromise with her rapist--to achieve precisely these aims.

Hand in hand with this process, figures close to the administration and to Clinton have conducted a media and lobbying campaign to whitewash the June 28 coup as a "defense of democracy." Lanny Davis, who served as counsel to President Bill Clinton and is one of Hillary Clinton's closest political supporters, emerged as a lobbyist for right-wing Honduran businessmen. Appearing before Congress, he declared that "democracy and civil liberties are flourishing in Honduras."

Still not a coup according to the US. The rest of the world is shocked. Nothing will happen, Arras will throw in the towel (72 hour extension is already expired) and Michelleti will be the President of Honduras, imo.