The Islamic militias have taken control of much of southern Somalia
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At least 19 ministers and deputy ministers in Somalia's transitional government have resigned, a cabinet minister has told the BBC.
Public Works Minister Osman Ali Atto said he came back from the capital with an agreement from the Islamic courts that fresh talks be held.
But he said that Prime Minister Ali Mohamed Ghedi was "an obstacle to progress" and had refused to listen.
Some MPs are now planning a motion of no confidence in the government.
The MPs are opposed to the deployment of foreign peacekeepers and the presence of Ethiopia troops in Baidoa.
More resignations are expected and observers say that the transitional government is looking increasingly fragile.
President Abdullahi Yusuf's government has little influence outside its base in Baidoa, but has the diplomatic support of the UN and the African Union (AU) and the strong backing of neighbouring Ethiopia.
Many Somalis, including the Union of Islamic Courts (UIC) which control much of southern Somalia, are opposed to the presence of Ethiopian troops on Somali soil.
A statement from the MPs said the government lacked transparency and accountability.
"We have seen that the government cannot carry out national reconciliation and development," it said.
Warning
Both Ethiopia and Eritrea have been warned not to interfere in neighbouring Somalia by the United Nations and United States.
The State Department said they should avoid actions that might harm peace talks whilst a UN envoy said he did not want to see them fight a proxy war.
There are reports that Eritrea sent a plane-load of weapons to help the Islamic courts militia.
Ethiopian troops have been seen in Baidoa and another town.
There are fears that Somalia could end up a battleground between Ethiopia and Eritrea - who fought a two-year border war between 1998 and 2000.
Analysts say neither Eritrea nor Ethiopia would want to see a regime in Somalia hostile to their interests.
Eritrea has warned Ethiopian troops to leave, saying Somalia should be "masters of their own destiny".
President Yusuf has repeatedly called for peacekeeping troops to be sent to bolster his government, but the UIC strongly opposes their deployment.
The UIC in the capital are taking over Somalia's former presidency, Villa Somalia, on Thursday and turning it into an Islamic court.
Deputy Prime Minister Husayn Aideed, formerly in charge at Villa Somalia and one of the warlords who used to control parts of Mogadishu, is reported to have agreed to work with the Islamists there.