Liberation Tigers of Tamil Eelam leader Velupillai Prabhakaran on Sunday issued an ultimatum to the new Sri Lankan government to come up with a reasonable political settlement by December 31 or risk the rebels setting up a separate state.

He said the LTTE's patience was wearing thin and he was making a final appeal for a political settlement that would answer their call for a separate state for the island's minority Tamils.

"This is our urgent and final appeal," he said. "If the new government rejects our urgent appeal, we will, next year... establish self-government in our homeland."

He said that the island's new president Mahindra Rajapakse had failed to grasp the fundamentals and basic concepts behind the decades-long war waged by the LTTE.

"Our people have lost patience, hope and reached the brink of utter frustration," Prabhakaran said at the end of a weeklong commemoration of 18,000 Tiger guerrillas who died in the fight against the security forces.

"They are not prepared to be tolerant any longer. The new government should come forward soon with a reasonable political framework that will satisfy the political aspirations of the Tamil people. This is our urgent and final appeal.