Thai PM Abhisit testifies in political funding case

BANGKOK Mon Oct 18, 2010 9:30am EDT

Thailand's Prime Minister Abhisit Vejjajiva attends a parliamentary session in Bangkok, August 19, 2010. REUTERS/Chaiwat Subprasom

Thailand's Prime Minister Abhisit Vejjajiva attends a parliamentary session in Bangkok, August 19, 2010.

Credit: Reuters/Chaiwat Subprasom

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BANGKOK (Reuters) - Thailand's Prime Minister Abhisit Vejjajiva took the witness stand on Monday in a trial that could lead to his removal from office and the dissolution of his ruling Democrat Party for alleged funding irregularities.

Abhisit is among 31 executives who could be banned from politics for five years if the Democrat Party is dissolved, one of several possible outcomes that could intensify a protracted power struggle in Southeast Asia's second-biggest economy.

Thailand's oldest party is accused of misusing an election grant and the Constitutional Court's verdict could further complicate a political crisis studded with street protests, party dissolutions and military intervention.

"It's an attempt to malign the Democrat Party," Abhisit told reporters after giving testimony. "The Election Commission (EC) has checked and approved the use of the fund in detail."

The court set a date of November 29 for final statements but has yet to give a date for its verdict.

The case comes at a difficult time for the Oxford-educated Abhisit, whose fragile government is fraught with infighting and veiled threats by a vital coalition partner to quit the alliance, which the Democrats lead with only a thin majority.

Although bans and dissolution are seen as highly unlikely, the uncertainty surrounding the complex case and the numerous possible outcomes have ramped up tension within the coalition.

BARGAINING POWER

"There are several laws and several legal scenarios to consider. That is why there is so much agitation and speculation which some coalition parties are using to gain some negotiation power," said Sukhum Nuansakul, an independent political analyst.

The case has had little impact on financial markets, which have rebounded since the end of deadly political violence in May, with the baht reaching a 13-year high and the benchmark stock market index around a 14-year high.

The EC accuses the Democrats of misusing a 29 million baht ($970,000) grant ahead of the 2005 election by failing to declare the purchase of campaign signs that were smaller and cheaper than those they had requested funds for.

While dissolution and bans would be a setback for the party's powerful backers among the military and royalist elite, analysts say it is likely that contingency plans are in place to ensure there is no real change to the status quo.

However, an acquittal would anger the government's powerful opponents in the Puea Thai Party and its affiliates, the "red shirt" protest movement, which have long claimed that allies of the Democrats are meddling in the judicial process.

Two of Puea Thai's former incarnations have been dissolved by the courts since the army's 2006 overthrow of twice-elected premier Thaksin Shinawatra, who remains banned from politics along with 111 of his closest allies. Thaksin fled Thailand before being sentenced to two years in prison for graft.

(Writing by Ambika Ahuja; Editing by Alan Raybould)

(ambika.ahuja@thomsonreuters.com; +66 2 648 9739))

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