(Recasts with king's reaction) By Gopal Sharma KATHMANDU, Nov 22 (Reuters) - Thousands of Nepalis took to the streets on Wednesday to celebrate the signing of a peace deal between the government and Maoist rebels which many hope will end a decade of civil war, kidnapping, murder and fear. The government declared Wednesday a public holiday. It asked residents to illuminate their homes and officials to light up public buildings to mark the end of a conflict which left 13,000 dead and divided the nation. Around 10,000 people attended rallies organised by political parties and the Maoists in Kathmandu. Many people waved red hammer and sickle flags and chanted slogans such as "This is a victory for peace-loving people" and "Implement the deal". "I hope no mother will lose her children to conflict and no children will become orphans any more due to violence," said 54-year-old Kathmandu street vegetable vendor Punam Shrestha. King Gyanendra, who was forced to give up power in the face of mass street protests in April, said the peace pact reflected the aspirations of ordinary Nepalis and that he hoped it would set the nation on the road to prosperity. "His Majesty appreciates the contributions of all those involved in bringing to an end bloodshed, violence and terrorism through the peace accord," the palace said in a statement. Nepalis were optimistic of better times, but wary of the challenges of turning paper promises into lasting peace. "We are on the threshold of peace and a new history," said Yubaraj Ghimire, editor of the widely read news magazine, Samay, adding that the signatories now needed to keep their promises. "Especially the Maoists need to show that their cadres are fully disciplined and obey the leadership," he said. The deal, signed by Prime Minister Girija Prasad Koirala and rebel chief Pushpa Kamal Dahal, who goes by his nom de guerre Prachanda, clears the way for the Maoist soldiers to lock up their arms and be confined to camps. Maoist leaders will take seats alongside elected politicians in parliament and join an interim government to oversee elections for an assembly that will draft a new constitution and decide the fate of the monarchy. "What until recently was an improbable peace has become a reality," the Kathmandu Post said in an editorial. "The signing on a piece of paper will have no meaning in itself if the stakeholders concerned fail to abide by the accord in its true spirit." The United States, which still considers the Maoists a terrorist organisation, demanded an end to violence, extortion and the forced recruitment of rebels. The peace process got under way shortly after King Gyanendra surrendered power to political parties in April after weeks of often bloody street protests. Since then the Maoists and the government have observed a ceasefire, although this has not stopped the rebels recruiting thousands of new fighters or demanding money from businessmen and ordinary people across the country. "The critical test of this agreement will be its implementation on the ground," influential neighbour India said. There are still risks and hurdles ahead. The Maoists will retain the only key to the containers where their arms will be stored under U.N. supervision, and could resume their armed struggle if they lose confidence in the peace process. The rebels are also demanding the full integration of their fighters into the national army, something the army is very reluctant to countenance on a large scale, diplomats say. Bishna Raj Upreti, who teaches conflict management at Kathmandu University, said rebel fighters and victims of the conflict needed to be rehabilitated and reintegrated into society. "This is only a beginning," he said. The conflict, which began in 1996, has hit tourism in Nepal, home to eight of the world's 14 highest mountains, including Mount Everest, and badly damaged an already weak economy.
