Thai troops fired repeatedly in the air in central Bangkok on Monday, forcing anti-government protesters to abandon a blockade of a key traffic junction in a first show of strength since an emergency was declared.
The red-shirted protesters had torched a bus and thrown scores of molotv cocktails at security forces faced off at Din Daeng junction before the army finally retaliated, witnesses said.
The clashes, two days after protesters forced a cancellation of an Asian summit, have undermined confidence in the country, still reeling from last year's political chaos and the global financial crisis.
"I believe the darkest days in Thailand's history are yet to come as we see no swift solution to ongoing divisiveness," said Prinn Panitchpakdi, a CLSA Asia-Pacific analyst.
Bangkok Medical Centre director Peeraphong Saicheau said 77 people were injured in clashes at the junction, which began just before dawn. Two civilians and two soldiers had gunshot wounds.
The junction is a crucial part of Bangkok's traffic system, although Monday is the start of a three-day holiday for the Thai New Year and many people have already left for the provinces. Financial markets are shut until Thursday because of the holiday.
Troops moved in with water cannon after protesters loyal to former prime minister Thaksin Shinawatra poured some kind of fuel on the road, threatening to set it ablaze if soldiers acted.
They eventually pushed the protesters out of the junction, detaining several and stripping them of their trademark red shirts.
INTRACTABLE POLITICAL DIVIDE
The street violence erupted after Prime Minister Abhisit Vejjajiva on Sunday declared a state of emergency in Bangkok after the "red shirts" forced the cancellation of an Asian summit.
Last year, the "red shirts" were in power and it was the "yellow shirts" — royalist supporters of the current government — who held nearly nonstop protests in the capital, culminating in a week-long occupation of Bangkok's main airports.
Thailand's intractable political divide pits royalists, the military and the urban middle class against a less well-off rural majority loyal to Thaksin and his populist policies.
The political strife had died down for a while after Abhisit came to office in December through parliamentary defections that Thaksin supporters say the army engineered. They demand new elections, which they would be well placed to win.
Protests flared anew after Thaksin, ousted in a 2006 coup and living in exile to avoid jail on a corruption conviction, set a deadline for Abhisit to resign by April 8 — the day before Thailand was to host the East Asia Summit in Pattaya.
His supporters descended on the beach resort city 150 kms (90 miles) south of Bangkok. Ahisit's strategy of treating them gently to avoid inflaming passions backfired when they smashed their way through a cordon of troops into the venue, forcing an evacuation of leaders by helicopter.
Now with fires blazing in the street and smoke from burning tyres rising over the city of some 12 million, a political solution appears as distant as ever.
Thaksin, who has been making nightly phone calls to his supporters from exile, told other supporters at Government House on Sunday night that he was ready to move back to Thailand to lead a people's uprising if there was a coup.
Thailand has seen 18 coups since 1932 and another one is certainly a possibility if there is blood in the streets. But the military is loathe to intervene since that would neither stop the protests nor cure the political divide, analysts say.
Several thousand "red shirts" were still encamped at Government House, about 4 km (2.5 miles) from Din Daeng junction, where they have been demonstrating for nearly three weeks.
Their numbers have shrunk considerably from around 40,000 on Sunday night and busloads were seen leaving to reinforce the Din Daeng blockade, Reuters reporters at the scene said.
Abhisit, whose whereabouts is unknown since his humiliation at the Asian summit, made a televised appearance on Monday, urging the Government House protesters to leave and guaranteeing their safety.
The chaos in the capital is bound to further hit the tourism sector, one of Thailand's biggest foreign exchange earners. Several countries have already warned their citizens against travel.
"What we'll watch now is to see how unstable the situation becomes, and try to figure out what the lasting impact will be, mainly on investment in the economy, both domestic and foreign," said Thomas Byrne, senior vice president and regional credit officer for Moody's in Singapore.
