Q+A: Will the stalemate continue in Thailand?

BANGKOK (Reuters) - Thai anti-government activists showed no signs of ending their two-month protest in downtown Bangkok on Tuesday, despite their acceptance of a proposal to hold an early election in November.

Deputy Prime Minister Suthep Thaugsuban reported to law enforcement officials early on Tuesday to hear complaints lodged by the families of protesters killed in a clash with troops on April 10, apparently in response to a demand by the "red shirt" leaders.

But it appeared the protesters were not satisfied with Suthep's action and demanded he be formally charged for allegedly giving the order to use deadly force to quell the demonstration, dashing hopes for a swift end to the stalemate.

IS THE RECONCILIATION DEAL STILL ON THE TABLE?

Officially, the deal is still on, but it is unlikely the government will agree to the latest counter-proposals from the red shirts. An immediate resolution is unlikely and the protest will likely drag on.

Despite the red shirts' claim they are committed to Prime Minister Abhisit Vejjajiva's five-point reconciliation plan, their demands have placed the government in a tricky position.

The movement has agreed to a November 14 election but want to ensure the authorities are held accountable for the deaths of 20 demonstrators during the army's botched attempt to clear another protest site in Bangkok's historic heart. The red shirt leaders, who are wanted on terrorism charges, say they are willing to face justice, but demand that others involved in the violence must also be brought to book.

WHAT'S THE GOVERNMENT'S RESPONSE?

Abhisit on Sunday pleaded with the red shirts to agree to his proposal, which he said was "non-negotiable". He has not responded to their counter-demand, which a government spokesman said was "unclear".

Analysts say the demand will likely be ignored since it would humiliate the government, which would incur the wrath of rival "yellow shirt" demonstrators and Bangkok's middle classes, who have urged it not to cave in to red shirt pressure. Suthep has no parliamentary immunity having quit as a lawmaker due to a conflict of interest. It is highly unlikely charges will be brought against him. The government insists his appearance at the Department of Special Investigation was planned in advance and was not in response to the protesters' demands.

CAN THE RED SHIRTS SUSTAIN THEIR PROTEST?

Countless times, the government has assumed the red shirts would run out of steam and the protest would fizzle out, but it has been wrong. It has become clear that Abhisit cannot simply wait it out, especially given the immense damage to the economy and the reputation of his government and the army.

The nine-week protest reached its peak in mid-March, with tens of thousands of rural people camping out in Bangkok's streets. Although the bulk have returned to their farms and villages, the red shirts have tapped into the urban poor in Bangkok. Most are rural migrants -- like security guards, cleaners, taxi drivers and laborers -- and they are keeping the rally alive.

The numbers may have dropped off since the red shirts pledged to enter the peace process, but the movement has shown it can rapidly mobilize tens of thousands of people in the city and the provinces if it needs reinforcements.

HOW HAVE THE MARKETS RESPONDED?

Traders and investors are optimistic a solution can be reached, but remain cautious. Thailand's stock market initially jumped over 4 percent after the announcement of a reconciliation process, but the continued standoff and renewed violence at the weekend, combined with a crisis in the eurozone, have curtailed gains.

Foreign investors, who were net buyers for almost seven weeks from late February, drawn by cheap stocks and high dividend yields, have been net sellers for the last four sessions, offloading a combined 14.5 billion baht of stocks ($449 million) suggesting political unease is taking its toll.

"It's still not clear that all red shirt leaders will respond positively to the government's reconciliation plan. So far, news flows are mixed and this kind of uncertainty will fuel more foreign fund outflows," said Warut Siwasariyanon, head of research at Finansia Syrus Securities.

The baht was steady at around 32.28 per dollar in fairly active morning trade on Tuesday. Traders said external factors had an impact more than the domestic political impasse.

(Additional reporting by Viparat Jantraprap; Editing by Alex Richardson)