KIEV, Ukraine – Faced with the prospect of breakaway regions and a burgeoning financial crisis, outgoing President Leonid Kuchma signaled a willingness Monday to acquiesce to opposition demands for a new presidential election, a move that even Ukraine’s disputed presidential victor was willing to accept in two key eastern provinces.

“If we really want to preserve peace and accord, and if we really want to build up the democratic society we talk about so much, let’s organize new elections,” Kuchma said.

The statement represented a major retreat by Kuchma, who zealously backed Prime Minister Viktor Yanukovych as the winner in the hotly disputed Nov. 21 presidential runoff, an election that opposition leader Viktor Yushchenko, international observers and Western governments say was marred by widespread election fraud.

He made the remarks after speaking by telephone with U.S. Secretary of State Colin Powell, who urged the Ukrainian leader to find a peaceful solution to the crisis, one that abides by Ukraine’s constitution.

Powell also urged Kuchma to maintain Ukraine’s territorial integrity in the face of threats from pro-Yanukovych provinces in the east to secede if Yushchenko were named president.

Yanukovych also backtracked Monday, saying he would agree to new balloting in the Donetsk and Luhansk provinces in eastern Ukraine, both staunchly pro-Yanukovych regions where Yushchenko has alleged widespread election fraud took place that favored Yanukovych.

Yanukovych qualified his remarks by saying allegations of election fraud in those two regions would have to be proved before he would agree to new balloting.

Taken together, the statements of Yanukovych and Kuchma marked a dramatic shift in strategy in the face of hundreds of thousands of demonstrators in Kiev and elsewhere in Ukraine who have not relented in their protests against Yanukovych’s disputed victory.

Mobilized by Yushchenko, who also served as prime minister under Kuchma, the demonstrators have filled the Ukrainian capital’s streets for eight days, enduring frigid weather and in many cases traveling from far-flung regions in western Ukraine.

Without resorting to violence, demonstrators have used human blockades to keep employees from their offices at the Cabinet building, where Yanukovych works, and also have surrounded other government buildings, including the presidential administration building.

Yanukovych, who has been in his native Donetsk region since the weekend, said he moved his family out of Kiev because of the protests. He said his ability to run the government has been hindered.

“I, the head of the government, am being excluded by illegal means from the process of managing the government,” the prime minister said. “They are humiliating and insulting people, those who … try to go to work. They blocked my route to work.”

The crisis gripping the eastern European nation of 47 million has also wreaked havoc on its economy and the government’s ability to raise revenue, Kuchma and Yanukovych aides said.

The turmoil has cost the government more than $187 million in lost tax revenue since the crisis began, Kuchma said. The flow of goods in and out of Ukraine has dropped four-fold, and western provinces have stopped paying for coal and electricity, he said.

“A few more days, and the country’s financial system may break up like a house of cards,” Kuchma said.

Adding to the pall of uncertainty hanging over the country is talk in the staunchly pro-Yanukovych provinces in Ukraine’s industrialized eastern regions about seceding if Yushchenko is declared president. Donetsk lawmakers decided over the weekend to hold a referendum this Sunday to ask voters if they support making the province a republic, which would provide some self-rule.

Donetsk lawmakers voted to hold the referendum after Yanukovych appeared in the eastern steel city of Donestsk over the weekend, along with Moscow Mayor Yuri Luzhkov. Luzhkov’s appearance fueled concerns that Russia was continuing its overt support of Yanukovych, who campaigned on a pro-Russia agenda.

Kuchma spoke out Monday against proposals for autonomy in the east. “I don’t know who needs bits of a shattered Ukraine, but certainly not Ukrainians,” the president said. “I believe that in no case must we allow Ukraine to break up or split.”

Speaking to demonstrators massed in Kiev’s Independence Plaza, Yushchenko said his allies in parliament would introduce a resolution Tuesday calling for Yanukovych to step down as prime minister because of his alleged involvement in the push for autonomy in Ukraine’s eastern regions.

“Tomorrow will be a very important day in parliament,” Yushchenko told the crowd. “We want to condemn the actions we have witnessed in the past two days in the east of the country. The government has lost control of the political, economic and financial developments in Ukraine, and therefore tomorrow we will propose that the Yanukovych government resign.”

Much of Ukraine’s fate rests with the country’s Supreme Court, which Monday began hearing Yushchenko’s appeal requesting an annulment of the runoff because of fraud. Though the country’s election commission declared Yanukovych the winner by a 3 percentage point margin, international observers reported widespread election fraud, including ballot stuffing, abuse of absentee ballots and voter intimidation.

Under Ukrainian law, the court cannot overturn the election results but can consider allegations of election fraud associated with specific regions. Yushchenko’s legal team said it submitted evidence of election fraud in eight eastern and southern provinces, where Yanukovych’s support is strongest.

The court may take several days to make its decision. In the meantime, it gave Yanukovych’s legal team until Tuesday to pore over new evidence of possible election fraud presented Monday by Yushchenko’s lawyers. Yanukovych’s inauguration is on hold until the court issues its ruling.

Stepan Havrysh, a Ukrainian lawmaker and Yanukovych ally, warned that a court decision seen by Yanukovych supporters as politically motivated would deepen the country’s crisis and embolden eastern Ukrainian officials who advocate breaking off.

“I expect a decision that is not colored by political influence, because political influence will only encourage civil conflict,” Havrysh said.

Yushchenko has suggested a second runoff could be held as soon as Dec. 12. Whether that date is realistic remains to be seen.

The makeup of the country’s pro-Yanukovych Central Election Commission likely would have to be changed, as would the composition of the regional and local election commissions that critics say were responsible for contributing to election irregularities. And, new laws would have to be enacted to curb the kind of alleged election fraud that tainted the runoff.

Yanukovych would have to do without a large chunk of his campaign team if a new election were held. His campaign manager, Serhiy Tyhypko, quit Monday and took with him about 30 other campaign aides who are also members of Tyhypko’s Labor Ukraine Party. Tyhypko also quit his post as head of Ukraine’s National Bank.