Malaysia's PM in danger as Mahathir quits party

By Jalil Hamid

KUALA LUMPUR (Reuters) - Prime Minister Abdullah Ahmad Badawi rejected calls to step down after his predecessor quit Malaysia's main ruling party on Monday, a move that could undermine its hold on power.

Mahathir Mohamad, who handpicked Abdullah as his successor in 2003, insisted that he would not return to the United Malays National Organisation (UMNO) until the premier leaves, adding to political uncertainty that could roil financial markets.

"Why should I?" Abdullah said in response to a reporter's question on Mahathir's call for him to resign. "I have work to do, I will continue to work," he said, adding that he was shocked at Mahathir's resignation.

It was not immediately clear whether the 82-year old Mahathir, who led UMNO for 22 years, would form a splinter party to fight UMNO, but analysts said the move was aimed at jolting the party to act against Abdullah and to preserve Mahathir's legacy.

"There has been too much talk and no action by those who are anti-Abdullah," said former deputy premier Musa Hitam. "So Mahathir has to take the first step. Many will follow soon."

"Then an UMNO emergency meeting has to take place to decide on PM's fate," he told Reuters.

Mahathir stepped up pressure for Abdullah to resign after the premier led UMNO, and the ruling coalition it leads, to a dismal showing in a general election in March.

His departure came three days after Abdullah ordered the attorney-general to investigate him and five others on possible offences over the appointment of judges while Mahathir was in power.