Thai "red shirts" study PM's election offer
BANGKOK (Reuters) - Anti-government protesters in Thailand were considering on Tuesday a proposal by Prime Minister Abhisit Vejjajiva to call a November election aimed at ending a two-month political crisis in which 27 people have been killed.
Abhisit, backed by the royalist establishment, made the offer in a televised address late on Monday. He had rejected an offer last month by the mostly rural and urban poor "red shirts" to end their occupation of Bangkok's main commercial district in return for elections within three months.
Thailand's benchmark stock index jumped 4.5 percent as investors focussed on a possible end to a stalemate that had raised the risk of civil war in one of Southeast Asia's most promising emerging markets.
"Market momentum is definitely going to get better and this is primarily driven by the prime minister's televised proposal last night," said Sukit Udomsirikul at Siam City Securities. "Whether this is a game-changing plan, we'll find out."
The Thai baht firmed nearly a quarter percent. Prices of government bonds, seen as a safer bet at times of tension and therefore strong in recent weeks, fell.
If the red-shirted protesters agree to the offer, the central bank is more likely to raise interest rates in June with political tension less of a drag on the economy. Thailand's finance minister said last week the protests could cut growth by 2 percentage points if they continued all year.
Reflecting a shift in consensus interest rate expectations, the one-year onshore interest-rate swap, the fixed cost needed to receive a floating payment, rose to 1.48 percent from 1.30 percent. The benchmark rate is now at 1.25 percent.
Reaction from leaders of the red shirt United Front for Democracy Against Dictatorship (UDD) was cautiously positive.
Asked if an agreement was in sight, Suporn Attawong said: "It would be wonderful to reach an end without more losses."
He said some sort of response would be made on Tuesday, adding he thought UDD Chairman Veera Musikapong would probably seek talks with the government on Abhisit's five-point plan.
The cost of insuring Thailand's debt against default hit a two-week low. Five-year credit default swaps fell 16 basis points (bps) to 114/118, traders said.
"There is hope that this proposal may go through and lead to a peaceful end to the protests," said Yang-Myung Hong, credit analyst at Nomura.
CRUCIAL TIMEFRAME
Abhisit had previously offered an election in December, about a year before his term ends, and some analysts doubted whether the slightly earlier date would satisfy the red shirts, who broadly back Thaksin Shinawatra, the populist billionaire ousted as prime minister in a 2006 military coup.
They say both sides want to be in power in September for two critical events -- a reshuffle of leaders in the military and police force, and the passing of the national budget.
If Thaksin's camp prevails and is governing at the time of the military reshuffle, analysts expect big changes, including the ousting of generals allied with Thailand's royalist elite, a prospect royalists fear could diminish the power of the monarchy.
"The game plan is for the government to make it appear this offer is reasonable. If the red shirts reject it, they'll be seen as the unreasonable party and that will then give the government a chance to go after them," said Roberto Herrera-Lim, an analyst at risk consultancy Eurasia Group.
"It doesn't seem like much of a compromise. This just shows how crucial the timeframe is and the importance of having that reshuffle of the military and police take place before an election."
Abhisit is under intense pressure to end the political stalemate that has choked off tourism, forced posh hotels and malls to close and prompted the International Crisis Group to warn Thailand could slide into an "undeclared civil war".
In his televised statement, Abhisit set five broad conditions for reconciliation that must be agreed before any election.
The monarchy, he said, should not be dragged into politics or "violated" -- a condition that follows government accusations some "red shirts" aim to overthrow the monarchy.
The second condition calls for reforms to address social injustice, the third proposes an independent body to monitor media to ensure unbiased reporting and the fourth a committee to investigate recent political violence.
The fifth point broaches possible political reforms that could include constitutional amendments and a review of a five-year ban on politicians allied with Thaksin.
They were written in language broad enough to appeal across the political spectrum, leaving the date of the new election still as the main sticking point.
"No one is going to disagree with the five conditions. They are just decoration because that's the language you use in any call for national reconciliation. But the point is that this is the first concrete offer from the government," said Chiang Mai University political science professor Thanet Charoenmuang.
The red shirts say Abhisit lacks a popular mandate after coming to power in a controversial parliamentary vote 17 months ago, heading a coalition cobbled together with military help.
On Tuesday, thousands of protesters remained in the fortified camp in Bangkok's main shopping area. Army spokesman Sansern Kaewkamnerd has said the security forces could use armoured vehicles to disperse them but no move has been made to do that.
(Additional reporting by Saikat Chatterjee in Hong Kong; Writing by Alan Raybould; Editing by Alex Richardson)