* PM lifts decree, seeks reconciliation
* "Red shirts" plan protest in capital on Saturday
* Detained red shirt leaders free on bail
* Thaksin in Liberia
By Pracha Hariraksapitak
BANGKOK, April 24 Thailand's prime minister ended a 12-day state of emergency in Bangkok on Friday and called for constitutional reforms in a bid to heal the deep political rifts behind recent violent protests.
"The lifting of the decree will send a signal to the world that Thailand is back to normal," Abhisit Vejjajiva told reporters after signing the order ending emergency rule in the capital and nearby areas.
Thai shares .SETI rose after the announcement as investors hoped for a return to stability.
Bangkok has been calm since troops and local residents fought running street battles with red-shirted supporters of exiled former Prime Minister Thaksin Shinawatra seeking to topple Abhisit and force new elections.
But Thailand's four-year-old political crisis, which has eroded confidence in the tourism- and export-driven economy, is far from over.
A leader of the pro-Thaksin United Front for Democracy against Dictatorship (UDD) called on supporters to rally in Bangkok on Saturday night.
"We will demand Abhisit's resignation, a dissolution of the House and the scrapping of all arrest warrants against the red shirts," Somyos Prueksakasemsuk told a news conference.
The pro-Thaksin political opposition accuse Abhisit of using heavy-handed methods to stop the protesters, who forced the embarrassing cancellation of a summit of Asian leaders.
Abhisit rejected the charge but agreed to an independent inquiry into the clashes, which killed two people and injured more than 100 others.
He said lifting the decree showed he was serious about reconciliation, and a court granted bail to three UDD leaders detained since April 14.
But police are hunting for others blamed for Thailand's worst street violence in 16 years, as well as gunmen who attempted to assassinate the leader of a royalist, pro-government group.
Sondhi Limthongkul, co-founder of the "yellow shirt" movement that led mass protests against Thaksin before he was ousted in a 2006 coup, will stay in hospital for a few more days to recover from a head wound, a colleague said.
Political analyst Thitinan Pongsudhirak said the onus was now on Abhisit to push through political reforms to "reset the democratic game" in Thailand.
Broadly speaking, the crisis is a battle between the "yellow shirts" -- royalists, the military and urban, middle-class Thais who back Abhisit -- and the "red shirt" supporters of Thaksin, whose power base was mainly drawn from millions of rural and urban poor who loved his populist policies.
The UDD wants new elections, arguing that Abhisit's victory in a December parliamentary vote with the help of Thaksin defectors was illegitimate.
Abhisit has rejected a new poll, but he proposed an all-party commission to reform the military-inspired constitution drafted in 2007 after Thaksin was ousted.
The constitution has been a source of political tension, criticised as a step back from the 1997 "People's Charter", which allowed for a fully elected upper house.
"This mechanism would be an open forum that includes all sides -- ruling parties, the opposition, civil society -- in discussing ideas about the political reform," government spokesman Panitan Wattanayagorn told Reuters.
However, Abhisit's plan faced opposition before it could get off the ground. Some parliamentarians have opposed talk of an amnesty for Thaksin allies banned from politics after they were found guilty of electoral fraud.
"The government should not use the amendment to cut a deal with the opposition to prolong its term," Senator Rosana Tositrakul said during the parliamentary debate.
Abhisit has firmly rejected an amnesty for those convicted of criminal acts, such as Thaksin, who lives in self-imposed exile to avoid a two-year jail term on conflict of interest charges.
THAKSIN IN AFRICA
The former billionaire telecoms tycoon turned up in the West African country of Liberia this week on a search for investment opportunities in mining, agriculture and gas.
Thaksin told reporters he liked the "good business climate" in Liberia, which is recovering from years of civil war and economic collapse.
Thai officials revoked Thaksin's passport after the latest violence in Bangkok, but the wily former premier has obtained a diplomatic passport from Nicaragua.
However, his living options have been reduced since Britain revoked his visa last year. Bangkok has urged the United Arab Emirates, Hong Kong and other governments to deny him refuge. (Reporting by Panarat Thepgumpanat and Chalathip Thirasoonthrakul; Writing by Darren Schuettler; Editing by Alan Raybould and Sanjeev Miglani)