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As others have said, it is, in all likelyhood, the reversing switch on top of the transmission. This was the first failure on my '96 850 wagon, when it was new--the switch died at about 10,000 miles.
By the way, it took three trips to the dealer to get the correct switch. The switch is different between the manual-transmissioned cars and the automatic-transmissioned cars, and the dealer parts guys apparently couldn't tell the difference. So if you are doing this yourself and ordering the part, make sure the guys are painfully aware that the part is for the manual-transmissioned version.
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