By Nopporn Wong-Anan and Bill Tarrant
BANGKOK (Reuters) - Thai anti-government protesters occupying an upmarket shopping area of Bangkok said Wednesday they were open to talks through a third party to prevent bloody clashes with armed troops threatening to forcibly evict them.
The comments signalled some flexibility in a bitter six-week confrontation that has badly hit Thailand's economy, although protesters were continuing preparations for another potentially bloody battle with the army..
The central bank opted Wednesday to leave interest rates at a record low of 1.25 percent, saying it would wait until the political situation became clearer before normalising rates.
"Looking forward, the policy outlook is subject to how the protests unfold in the coming weeks," said Usara Wilaipich, economist at Standard Chartered Bank.
Said Tim Condon, regional economist at ING Bank in Singapore: "My sense is that this is a central bank which is chomping at the bit to raise rates but it is the politics that is keeping it at bay.
Interviews with protest leaders at their newly fortified rally site in a luxury hotel and shopping area of central Bangkok indicated there could be a compromise on their demands for a snap election.
Kwanchai Praina, a red shirt leader from their stronghold in northeastern Isan province, said he would propose at a meeting of the group's leaders Wednesday they consider a three-month timeframe for Prime Minister Abhisit Vejjajiva to dissolve parliament.
"The government has the upper hand and maybe we should show some flexibility. Maybe parliament can be dissolved in three months," he told Reuters by the stage of the rally site, where around 15,000 people have gathered.
But Nattawut Saikuar, one of the three top red shirt leaders, said that was just one idea to be considered. He said the government may want to break up the rally, but the red shirts are willing to "call their bluff."
Yet another red shirt leader, Jaran Ditapichai, told Reuters the leadership would prefer any compromise proposal be made by a third party, given the anger in their community after clashes with the army killed 25 and injured more than 800 on April 10.
Kwanchai said he believed any crackdown would come by Monday. "We've heard from insiders in the government that April 26 is their deadline. At least two luxury hotels in the area said they have closed down until April 26 citing safety reasons."
Talks between Abhisit and "red shirt" leaders late last month collapsed after two rounds, with protesters refusing to accept an offer by the premier to dissolve the house within nine months.
Government spokesman Panitan Watanayagorn said Abhisit would be willing to hold talks with "red shirt" protesters, but only if they agreed not to escalate tensions.
Panitan gave no comment on insistence by protest leaders that they would talk only through a third party.
Their comments came amid boiling tensions in downtown Bangkok.
Red shirts armed with bamboo staves manned barricades made of tyres and paving stones two metres high just a stone's throw from troops guarding the Silom Road business district. Protesters hurled abuse and set off firecrackers to unnerve soldiers, many armed with loaded M-16 assault rifles and shotguns.
But they called off a march into the business district after an army spokesman said troops would use their weapons, with live ammunition, if provoked.
The tougher approach from authorities came after Abhisit handed primary responsibility for security to the army chief. Abhisit said Tuesday the army would try to take back the intersection, site of Bangkok's glitziest malls and hotels.
DANGEROUS STANDOFF
Analysts say the protest has evolved into a dangerous standoff between the army and a rogue military faction that supports the red shirts and includes retired generals allied with ex-Prime Minister Thaksin, who was toppled in a 2006 coup.
Red shirt spokesman Sean Boonpracong told Reuters the shadowy black clad gunmen seen at the April 10 rally were there to protect the red shirts. "They are a secret unit within the army that disagrees with what's going on. Without them, the black clad men, there would have been a whole lot more deaths and injuries."
Abhisit has repeatedly rejected demands to call an election he would almost certainly lose, saying the red shirts must be brought under control first.
He came to power in December 2008 in an army-brokered parliamentary vote after the ruling pro-Thaksin party was dissolved for electoral fraud.
Parties allied with Thaksin, a former telecoms tycoon now based in Dubai, have won the past four elections in Thailand based on programs to help the rural masses.
Both sides want to be in power for a military reshuffle in September. If Thaksin's camp is governing at that time, analysts expect it would bring about major changes by ousting generals allied with Thailand's royalist establishment, a prospect that royalists fear could diminish the power of Thailand's monarchy.
(Additional reporting by Martin Petty, Orathai Sriring and Viparat Jantraprap; Editing by Raju Gopalakrishnan)
