Snap Analysis: Thai protest ends, but crisis far from over

BANGKOK (Reuters) - Soldiers drove protesters out of their fortified encampment in central Bangkok on Wednesday, but furious crowds rioted in parts of Bangkok and set fire to buildings in the capital and in towns in Thailand's northeast.

The army said the situation was "under control" after several "red shirt" protest leaders agreed to surrender. But it was not clear whether furious red shirt crowds would heed calls by their leaders to end their protests and disperse.

Fires burned across Bangkok and some hardcore protesters who had engaged in four days of bloody battles with the army were still on the streets. Crowds also set city halls ablaze in Khon Kaen and Udon Thani, major cities in the red shirt's northeastern strongholds. A curfew was declared in Bangkok from 8 p.m. to 6 a.m. (1300 to 2300 GMT).

* The key near-term unknown is whether rioting and arson attacks in Bangkok and the northeast represent a last outpouring of anger by protesters, or whether they will intensify and spread overnight and in coming days. The former would give Thai markets some limited near-term relief. The latter would suggest a new phase in Thailand's political crisis, with the country sinking further toward the worst-case scenarios of prolonged unrest and even civil war, and would be profoundly negative for markets.

* The military's offensive to clear the protest site will be regarded as a relative success since massive bloodshed seems to have been averted. With about 3,000 protesters in the encampment and hundreds of defiant red shirt guards, the death toll could have potentially been much higher and that would have made the prospect of near-term reconciliation even more remote.

* The surrender of some of the protest leaders and their agreement to end the rally could pave the way for some kind of peace deal between the government and the movement. The red shirts now have little bargaining power but, given their potential to cause mayhem and hold the city and the country's economy hostage, the government might decide to make some concessions to ward of the threat of mass insurrection.

* However, it remains to be seen whether the increasingly divided red shirt leadership is able to control the protesters.

* The torching of city halls in two red shirt rural strongholds suggests more trouble could be ahead, even if peace is restored in Bangkok. The red shirts have very wide support in northeastern provinces and police and soldiers could be overwhelmed, perhaps even sympathetic to the movement.

* If violence worsens, the possibility of a military coup increases dramatically. But even if this restores order in the short term -- by no means guaranteed given signs of increasing divisions within the security forces -- it would probably be negative for markets. The last time the military was in direct control, following a coup in 2006, its management of the Thai economy was widely regarded as catastrophic.

* If violence wanes overnight and on Thursday, markets may rally slightly. The stock market is closed on Thursday but may reopen on Friday. Investors who have been offloading shares in recent weeks are likely to remain extremely cautious due to fear of continued unrest. Thai Finance Minister Korn Chatikavanij said on Wednesday the violence of recent weeks could shave half a percentage point off GDP growth.

* Even if peace is restored, Thailand's five-year political crisis is far from over. Analysts say the recent round of clashes has created a huge divide in society that could take years to heal and the country could be locked in a vicious cycle of political conflict with rival groups battling for power.

* If an agreement is made for an earlier-than-planned election, the polls could be fraught with problems. Neither side of the political divide is likely to accept defeat and could cry foul, with other protest movements taking to the street. Rival groups may even take up arms, analysts have said.

(Editing by Andrew Marshall and John Chalmers)