Athens/Nicosia  - Rival leaders in Cyprus launched a second round of UN-led reunification talks on Thursday, aiming to reach a solution to the decades-old division of the eastern Mediterranean island.

Governance and power sharing are the among the top issues Greek Cypriot President Dimitris Christofias and Turkish Cypriot leader Mehmet Ali Talat hoped to reach agreement on by the end of October.

"Despite the disagreements and problems we should not be pessimistic," Greek Cypriot government spokesman Stefanos Stefanou told state television RIK.

"Problems exist but so does the project ahead of us and we will work hard in order to reach a solution based on a bizonal bi-communal federation," he said.

"We now have a clearer picture were there are disagreements on both sides."

The talks, scheduled to resume September 3, was postponed by the Greek Cypriots after more than 650 Orthodox pilgrims were turned back from an attempt to visit the Agios Mamas church in northern Cyprus.

Greek Cypriot authorities claim the Turkish Cypriots caused border-crossing delays forcing the cancellation of the trip, while the Turkish Cypriots said the pilgrims had disregarded border procedure.

Greek and Turkish Cypriots launched renewed peace talks last September, but the pace has been slow after nearly 40 meetings at an abandoned airport inside the UN-controlled buffer zone.

The first round covered the groundwork on six chapters: governance and power sharing; EU matters; security and guarantees; territory; property and economic matters.

The eastern Mediterranean island has been divided since a Turkish invasion in 1974, sparked by a brief Greek-inspired coup.

Greek Cypriots have lived in the south of Cyprus and Turkish Cypriots in the north, split by a United Nations-supervised buffer zone which runs through the heart of the island's capital.

The 35-year conflict continues to pose a headache for diplomats. In 2004, Greek Cypriots rejected a UN settlement blueprint a week before the island joined the EU as a divided state.

Both ethnic communities agree, on paper, to reunite the island's two halves as a bi-zonal and bi-communal federation in the latest round of UN-led peace talks, but disagree on how it will work. Other disputes include the complex issue of property rights lost during the invasion.

Cyprus' leaders have agreed to put any peace deal to a simultaneous referendum in both communities.

EU officials have said that progress in the Cyprus reunification talks will be essential to move Turkey's slow-moving EU accession process forward.

Ankara's EU membership talks, which began in October 2005, have been partially frozen because of the situation on the island.

Turkey does not recognise the Greek Cypriot government and supports the breakaway Turkish Cypriot state in northern Cyprus where it has stationed more than 40,000 troops.

Greek Cypriots say they will not agree to Turkey joining the bloc as long as the island is partitioned. Ankara's progress in membership talks will be assessed later this year.