Abassi Madani and Ali Belhadj were taken on Tuesday from the military prison at Blida south of Algiers to a residence in the capital where they will be kept under house arrest. A presidential spokesman made assurances that the two men would be allowed to have full contact with FIS activists. Three other members of the FIS ruling council were also freed.
The move was a reversal by President Liamine Zeroual of the policy of excluding the FIS from the political process. In June 1991 the government jailed the two FIS leaders, and in January 1992 the army stepped in when the FIS were on the verge of a historic victory in the general elections. Mr Zeroual, not part of the cabal of officers who took power then, succeeded president Mohamed Boudiaf after Boudiaf's assassination in June 1992. Mr Zeroual has had to overcome opposition from hardliners in the military known as the 'eradicators' who were opposed to any accommodation with the Islamist movement.
The FIS statement called for a 'just, legitimate and durable solution allowing the return of stability in our country and giving the Algerian people the basis for building a civilised society based on the principles of Islam'.
The statement made no mention of a truce. What will emerge over the coming days is the extent to which these two veteran leaders still command the loyalty and discipline of FIS membership over this huge country. Their release could either provoke further attacks by the extremist Islamic Armed Group (GIA), which has been behind the bloodier assaults on foreigners and others, or could lead to defections from the GIA now that an Islamist political alternative has official sanction.
Talks on a national dialogue between the government and opposition groups are due to resume on Tuesday. Whatever powersharing arrangements might be devised between the regime and the FIS to solve problems on the political level, the country faces huge economic and social problems which have only worsened since the election. For years the state was the main employer, providing incomes for a largely non-productive workforce out of revenues from oil and gas. The slump in oil prices hit Algeria at a time of rapid population growth, unemployment and foreign debt. The successful rescheduling of part of its massive pounds 17.5bn debt after reaching agreement in April with the IMF will provide only limited respite.
If the dialogue fails, there are increased risks that the hardliners within the army could intervene again. This time France has indicated that it would not support them, and is in favour of national reconciliation.
The Algerian move will also have regional implications. Neighbouring Tunisia has tried to suppress its more moderate Islamist movement, but calls will increase in this more Westernised country for greater dialogue with the political opposition.