By Ambika Ahuja
BANGKOK (Reuters) - Protests and blockades in the provinces Monday, and a grenade attack against a politician, deepened fears of a civil conflict in Thailand after the prime minister rejected demands by anti-government protesters.
Thailand's revered King Bhumibhol Adulyadej made a rare appearance on Thai television at a ceremony to install judges, but made no direct comment on the political troubles in his kingdom, urging the judges to be honest and set a good example.
Protesters fortified a sprawling encampment in Bangkok's main shopping district and urged supporters in northern provinces to block convoys of police and soldiers from reinforcing the capital, adding to a growing sense of lawlessness.
Hopes for an end to a seven-week standoff that has paralysed Bangkok and killed 26 people were dashed on the weekend when Prime Minister Abhisit Vejjajiva rejected a proposal by the protesters for an election in three months.
Concern is growing about the impact the prolonged protests is having on domestic businesses, with signs that consumer confidence is flagging, and the tourism industry -- Thailand's biggest foreign exchange earner -- getting decimated.
The government said Monday it may have to shave 0.64 percent point from its 2010 economic growth forecast of 4.5 percent if the protests continue another three months.
Bargain hunters bought Thai stocks, pushing the local index up 1.3 percent, in line with most Asian markets. But Chris Wood, an analyst at brokerage CLSA, said he had cut his allocation of Thai stocks to zero. "All evidence still points to a potentially inflammatory stalemate in Thai politics," he said.
THREATS TO MONARCHY
Underlining those concerns, a grenade was hurled late on Sunday at a police post near the home of Banharn Silapa-Archa, chief adviser to the Chart Thai Pattana Party, part of the ruling coalition, wounding at least 11 people.
Army spokesman Sansern Kaewkamnerd distributed a chart on Monday showing the names of those who authorities said may be involved in a network to undermine the monarchy. The list included former premier Thaksin Shinawatra, several red-shirt leaders, academics, and others involved in anti-government community radio stations and web sites.
Thailand has a strict lese majeste law that restricts discussion of the country's revered institution, and has a maximum penalty of 15 years in jail for violations of it.
The 82-year king, who has been in hospital the past seven months, has stepped in to help resolve past political crises, the last time in 1992. But the constitutional monarch, who is considered a powerful symbol of unity, has made no public statements on the current political deadlock.
The mostly rural and urban poor "red shirts," responded to their leaders' call for resistance with a half-dozen blockades in their north and northeast strongholds, another headache for the Oxford-educated Abhisit, who faces pressure from many urban middle class Thais to take a hard line against the protesters.
Hundreds manned roadblocks in at least three northeastern provinces and around Bangkok to prevent security forces from entering the capital ahead of what protest leaders said was an imminent security crackdown. Local television footage showed protesters carrying out searches, even on soldiers.
A rival protest group known as the "yellow shirts" said they would gather Thursday outside a heavily fortified army barracks where Abhisit has a temporary office to urge authorities to disperse the red shirts. They also called for martial law in lawless areas of the country.
"Now there is a state within a state," Suriyasai Katasila, one of the movement's leaders, told Reuters Monday. "It's anarchy and the government needs to do something to end that."
The yellows shirts vowed to take action if the red shirts are not dispersed. They are well versed in street protests themselves, besieging the prime minister's office for three months and taking over Bangkok's airports for eight days in 2008.
PREPARING FOR BATTLE
The army chief has said repeatedly a crackdown would do more harm than good.
Any attempt to break up the red shirt encampment -- a 3 square-km area in a ritzy shopping district -- risks heavy casualties and the prospect of clashes spilling into high-end residential areas.
Red shirt guards wearing helmets and carrying wooden spears massed behind walls of tyres and bamboo poles at their Bangkok encampment in preparation for battle.
Army chief Anupong Paochinda acknowledged Sunday some retired and inactive officers had joined the protest movement, but sought to play down talks of a split in the armed forces.
Analysts say a well-armed rogue military element led by retired generals back the protesters and is allied with the red shirts' de facto leader, Thaksin, who was ousted in a 2006 coup.
Analysts and diplomats say both sides want to be in power in September during an annual reshuffle of the military, an institution central to protecting and upholding the monarchy.
The red shirts say Abhisit came to power illegitimately in 2008, heading a coalition cobbled together with the help of the military, after a pro-Thaksin government fell when a court dissolved a party affiliated with him.
(Additional reporting by Viparat Jantraprap and Sukree Sukplang; Writing by Bill Tarrant; Editing by Jeremy Laurence)
