Madagascar's president defies ultimatum

ANTANANARIVO (Reuters) - Madagascar's President Marc Ravalomanana said on Saturday he would not step down, defying an opposition ultimatum in a crisis on the Indian Ocean island that has killed more than 135 people this year.

Opposition leader Andry Rajoelina emerged from hiding to tell thousands of his supporters in the capital's central square he was giving Ravalomanana four hours to quit.

Less than an hour after the deadline had passed, Ravalomana came out of his presidential palace to talk to thousands of his supporters nearby blocking the road from the city centre.

"Yes, of course I'm still the president," he told Reuters. "No, I will not be resigning in the next 24 hours."

The political crisis has been running since the beginning of the year, damaging Madagascar's image as a sound destination for foreign investment and crippling the island's $390 million a year tourist industry.

Flanked by tight security, Rajoelina made a 'V' for victory sign before issuing his ultimatum to the supporters thronging the square that has been the epicentre of previous uprisings.

He told the rally he was ready for a democratic handover and would go to the presidential palace to bid Ravalomanana goodbye, but did not want to go with tanks and soldiers.

An aide to Rajoelina said after the deadline had passed that they were still waiting for the president to quit.

"We are waiting for the moment. If the president decides to leave, we'll wait for his call before heading to the palace for a democratic handover. If we don't receive the call something will happen," the aide, who declined to be named, said.

Earlier, opposition members seized control of the prime minister's office, declared they had assumed the powers of the presidency and pledged to hold elections within two years.

NO AUTHORITY

An aide to the president said the opposition had no legal authority and that Ravalomanana remained in his palace.

"This is and remains until now a street protest, using fear and repression to survive," the aide, who declined to be named, said. "It is unclear right now whether the whole of the army is behind the opposition."

The president said later that the solution to the crisis was national dialogue.

Rajoelina, 34, a former disc jockey, had been under U.N. protection since fleeing attempts to arrest him last week. He calls the president a dictator and has tapped into deep public resentment at Ravalomanana's failure to tackle poverty.

Ravalomanana has called on the security forces to restore law and order and said an attempt on his life would compromise the country's development.

There was a heavy military presence on the streets on Saturday, but the opposition rally passed off peacefully. Several opposition demonstrations have ended in violence after the security forces stepped in.

Ravalomanana has come under growing pressure to go. Dissidents in the army have called upon him to resign, although they have ruled out installing a military junta.

Rebel troops ousted the former chief of staff a day after he issued the island's feuding leaders a three-day ultimatum to end the impasse or face a military intervention. The soldiers said they had hidden tanks in the capital as a precautionary tactic.

European Union mission head Jean-Claude Boidin told Reuters any "non-constitutional" solution to the political impasse -- meaning a coup -- would lead to a suspension of aid.

(Writing by David Clarke)