Mr Sharif has staked his name on restoring the judges to their jobs
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The party of former Pakistani Prime Minister Nawaz Sharif is meeting to decide whether to remain in the country's new government.
Mr Sharif's party and its main partner, the PPP, have pledged to restore judges sacked by President Musharraf last year, but disagree on how to do it.
Further talks in London at the weekend failed to break the impasse.
Analysts say the failure to resolve the differences have put the six-week-old coalition under strain.
Some reports say Mr Sharif's PML-N, the junior party, may now pull out of the coalition.
It has already threatened to do so, but senior officials have suggested it would continue to offer its support to the government, for now at least.
'Disappointed'
The alliance had set Monday as the latest deadline to reinstate the judges, but Mr Sharif and the Pakistan People's Party leader, Asif Zardari, wrapped up talks in London without reaching a deal.
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SACKED JUDGES
March 2007: President Musharraf suspends Supreme Court chief justice, triggering protests
6 Oct 2007: President Musharraf wins election
3 Nov 2007: President declares state of emergency and sacks around 60 judges
22 Nov 2007: New Supreme Court upholds Musharraf election win
18 Feb 2008: New coalition government of PPP and PML-N emerge victorious in parliamentary polls
30 April 2008: Deadline set by two parties to reinstate sacked judges
12 May 2008: Second deadline to restore judges
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"I think every Pakistani is disappointed with the outcome of these talks," said Mr Sharif.
"Despite very sincere efforts we have not been able to resolve the deadlock."
The new government had initially promised to restore the senior judges by the end of April.
Ten days ago, following earlier talks, Mr Sharif announced that all the senior judges sacked by President Musharraf last year would be reinstated on 12 May.
Mr Sharif's party has campaigned for the unconditional reinstatement of the judges.
Mr Zardari wants the reinstatement of the judges to be part of a larger package of constitutional amendments which would include reducing their powers.
President Musharraf sacked about 60 judges - some sitting in the Supreme Court - in November 2007, after declaring a state of emergency.
The Supreme Court had been due to rule on whether his re-election was legal.
They had also been due to rule on a controversial amnesty covering Mr Zardari and his wife Benazir Bhutto, who was later assassinated.
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