LONDON - A UN peace envoy is suggesting a ceasefire in Libya, to be followed by the immediate creation of a transitional authority made up equally of the government and rebels and excluding Muammar Gadhafi or his sons, a senior European diplomat said.

The authority would appoint a president, control the police, armed forces and security services and would supervise a round-table reconciliation process, leading to elections to a national assembly which would write a constitution, the diplomat said.

The diplomat, who asked for his name and location to be withheld, was outlining ideas he said were being canvassed by UN Secretary-General Ban Ki-Moon's special envoy to Libya, Abdul Elah al-Khatib.

Khatib, a Jordanian senator, is seeking a political solution to a conflict that erupted in February between Gadhafi's forces and rebels based in the east. He has visited both sides several times.

Gadhafi has been holding on to power in the face of rebel attacks aimed at ending his 41-year rule and has rejected suggestions that he quit, as demanded by the insurgents.

The Libyan leader on Thursday ruled out talks with the rebels, casting doubt on a flurry of diplomatic efforts to end the conflict.

The European diplomat said that under Khatib's transition proposal, Gadhafi would have to step down, but rather than being a precondition it would be part of the process.

As soon as the transitional authority was created and Gadhafi no longer had control of the security forces, Libyans in Tripoli would no longer fear him and at that point his rule would in effect end, the diplomat said.

He added Gadhafi would only accept such a transition if he had guarantees on his personal fate, and so would not immediately be handed to the world court at The Hague, which has issued a warrant for his arrest for crimes against humanity allegedly committed by his security forces.

Gadhafi and his sons would be excluded from the transitional authority, the diplomat said, since the rebels would never accept such a role for Gadhafi family members.

Khatib could not immediately be reached for comment. But on July 11 he told reporters at the United Nations he had told Libyan leaders a body with representatives from all political parties, regions and tribes was needed to manage a transition.

The United Nations has said Khatib had put those ideas to Libya's prime minister and foreign minister.

France said on Wednesday Gadhafi could stay in Libya if he gave up power, an apparent softening of the West's stance in a new effort to find a diplomatic end to the war.

The United States says Gadhafi must quit, but whether he remained in Libya after that would be up to the Libyan people.

Libyan officials have said Gadhafi's departure was not up for negotiation and on Thursday the rebels said that no one seriously expected talks to end the crisis.