(Adds European Union diplomat, source on sanctions) By Daniel Wallis and Alistair Thomson NAIROBI, Jan 12 (Reuters) - The European Union, United States and United Nations urged Kenya's feuding politicians on Saturday to agree a peaceful and democratic end to violence that has killed 500 people since disputed Dec. 27 polls. A day after the opposition urged foreign sanctions against President Mwai Kibaki, who it says rigged his re-election, Washington and Brussels said it could not be "business as usual" with east Africa's biggest economy without a deal. "All political parties in Kenya should recognise that it cannot be business as usual in Kenya until there is political compromise which leads to a lasting solution that reflects the will of the Kenyan people," the EU said in a statement. The European Union and United States are coordinating their efforts to end the crisis in Kenya, an EU diplomat said. The top U.S. diplomat for Africa, Jendayi Frazer, said Washington was "deeply disappointed" that Kibaki and his rival Raila Odinga had not yet held face-to-face talks. "Both should acknowledge serious irregularities in the vote tallying which made it impossible to determine with certainty the final result," she said in a statement. "In the meantime, the United States cannot conduct business as usual in Kenya." Former U.N. Secretary-General Kofi Annan is due to lead a new push for peace in Kenya this week. But the opposition is planning new protests after African Union talks collapsed. An EU source said it was too early to talk about sanctions. "If there is not a positive outcome from the Annan intervention, then the EU has agreed that it will seriously review its relations with Kenya. This would include the issue of sanctions," the source said. The unrest has badly dented Kenya's democratic credentials, worried world powers and damaged its previously booming economy. U.N. staff say 500,000 Kenyans will need emergency aid such as food handouts after two weeks of riots and ethnic bloodshed. Fears have grown of further violence after Odinga's opposition Orange Democratic Movement (ODM) vowed to hold three days of protests beginning with a mass demonstration in Nairobi on Wednesday. Police have banned all political rallies. "DARK DAYS AHEAD" "The potential for further bloodshed remains high unless the political crisis is quickly resolved," U.N. Secretary-General Ban Ki-moon said in a statement issued in Nairobi. Kenyan media forecasted dark days ahead. "Recalling the lives lost and destruction visited on this country, both sides should pause a little and consider whether they want to be responsible for any chain of events that could wreck Kenya," the Daily Nation newspaper said in an editorial. "Given the government's intransigence and ODM's unrelenting demand for justice, the days ahead are bound to be the most difficult ... there is a dark, ominous cloud hovering above us," the Standard newspaper said. Parliament, where Odinga's party won 99 seats to 43 for Kibaki's Party of National Unity, is due to resume business on Tuesday and that is likely to prove another flashpoint. Since being sworn-in after a ballot that foreign monitors said fell short of democratic standards, Kibaki has entrenched himself by leading state functions, recalling legislators and naming most of a new cabinet. Analysts say protests appear to be the only way for Odinga to maintain pressure. The prospect of more turmoil has dismayed Kenyans enduring one of the worst episodes in 45 years since independence from Britain. More than 250,000 have been made homeless. Annan is expected in Kenya next week after AU Chairman and Ghanaian President John Kufuor failed to broker a deal. But the Nation newspaper said the former U.N. chief might have little to work with. "A cycle of attack and counter-attack could lead to complete anarchy," it said. "If this country goes down the drain, history will not record the hardliners in their respective entourages, but the principals who will bear personal responsibility." (Additional reporting by Darren Ennis in Brussels; editing by Elizabeth Piper)
A displaced woman sits at a temporary shelter after ethnic violence in Nairobi's Mathera slums January 12, 2008. Kenya's opposition on Friday called three days of nationwide protests next week after ...
