Blasts, shooting kill 1, wound 7 in Bangkok

BANGKOK (Reuters) - A Thai policeman was killed and seven people injured, including five police, when a drive-by shooting and a series of explosions shook Bangkok's heavily guarded business district late on Friday.

The shooting and explosions, which police suspected were grenades, took place after midnight in the Silom Road area guarded by soldiers and packed with hotels and bars popular with tourists. The area is close to the entrance to a fortified encampment held by anti-government protesters for four weeks.

The incidents will raise tensions in the capital after a week of calm as "red shirt" demonstrators hinted they may be able to strike a deal in the coming days to end a deadly crisis that has killed 28 people and wounded more than 1,000.

Prime Minister Abhisit Vejjajiva has put forward a plan to end the rallies that have crippled the capital and scared off tourists, but it remained in limbo as rival factions squabbled over details, including a proposed early election in November.

"We are not calling off protests as yet," Jaran Ditapichai told Reuters after meeting fellow leaders. "We have a proposal for Abhisit and we will talk about it in more detail later."

The stand-off has paralysed the commercial heart of the capital for nearly two months, but its roots stretch back to the prime ministership of Thaksin Shinawatra -- a populist tycoon ousted in a 2006 military coup -- and the deep social divisions it exposed between Thailand's traditional elite and rural masses.

Thai stocks fell 2.1 percent on Friday, but other Asian markets were also in negative territory. Thai stocks have given up gains scored on Tuesday, when the index jumped 4.4 percent in reaction to Abhisit's reconciliation plan.

STAY OR GO?

Abhisit offered to dissolve parliament in the second half of September ahead of an election on November 14 as part of a plan to end a crisis in which 28 people have died and more than 1,000 wounded in clashes.

But that failed to convince the mostly rural and urban poor "red shirt" protesters who have refused to budge from the commercial district, where upscale malls and luxury hotels have been forced to close their doors since April 3.

A local business group put revenue losses in the area since April 3 at about 174 million baht (3.6 million pounds) a day.

At least 10,000 protesters rallied on Friday night at the heavily barricaded camp covering 3 sq km (1.2 sq miles) of an upmarket commercial district in central Bangkok.

Friday's shooting took place just 50 metres from the fortified front lines of the red shirt encampment in a business district packed with hotels, banks and offices close to the city's famous Patpong go-go dancing bars. No arrests were made.

One policeman died during emergency surgery.

The wounded included two "multi colours" protesters among a group of several dozen who had gathered to voice their opposition to the red shirts near a branch of Krung Thai Bank, the same location targeted in M-79 grenade attacks on April 22 that killed one and wounded more than 80.

Reuters reporters heard three loud blasts in quick succession in the same area about two hours after the shooting and hospital sources confirmed four policemen had been injured by the explosions. Police suspected grenades may have been used and an investigation was under way.

There were mixed signals on Friday from the red shirt camp that broadly backs Thaksin, who is loved by many among the rural poor but loathed by conservative elites and middle classes, who accuse him of corruption and disloyalty to the monarchy.

"Most leaders are ready to leave. A couple of leaders are still concerned that leaving the streets now would mean failure for the movement," said protest leader Kwanchai Praipanna.

Complicating the picture, Abhisit faces some opposition from the government's traditional backers after the yellow shirt group, which broadly represents the anti-Thaksin royalist elite and the middle classes, condemned his plan.

The yellow shirts, whose eight-day occupation of Bangkok's airport in 2008 helped undermine a Thaksin-allied government, said Abhisit should resign if he cannot enforce the law and end the occupation of the shopping district.

The red shirts, who had demanded immediate elections when their latest protest rally started in mid-March, say the ruling coalition lacks a popular mandate after coming to power in a controversial parliamentary vote 17 months ago.

Protest leaders are demanding a specific date for dissolution of parliament -- a technicality analysts said was probably an excuse to negotiate a better deal.

(Additional reporting by Chalathip Thirasoonthrakul and Sompoch Isarawuthakun; Writing by Martin Petty)