(Refiles, fixing GMT time in third paragraph)
By Ambika Ahuja and Nick Macfie
BANGKOK, April 16 (Reuters) - Thai anti-government protest leaders staged a dramatic escape from police on Friday after the authorities vowed to crack down on "terrorists" ahead of a planned televised address by the prime minister.
One protest leader slid down a rope from a balcony, while others were rescued from riot police by hundreds of "red shirts", who heavily outnumbered security forces at a Bangkok hotel owned by the family of former Prime Minister Thaksin Shinawatra.
Prime Minister Abhisit Vejjajiva had been due to hold his first news conference in four days at 1 p.m. (0600 GMT) but it was delayed. No reason was given.
So what happens now?
It is unlikely in the short term. The failed attempt to eject protesters from one of their encampments last Saturday, which turned into violent clashes, embarrassed the military. It is now on a public relations offensive to explain that security forces were targeted by "terrorists". The army is unlikely to come out in full force again, risking its reputation to protect Abhisit, whose political capital appears to be dwindling.
The protesters have consolidated at the Rachaprasong intersection shopping district. The geography of the area and the presence of families, tourists and expatriates in luxury hotels and apartments make it very unlikely the troops will move in.
A state of emergency is in effect, banning public gatherings of more than five people, yet thousands remain on the streets. Army chief Anupong Paochinda said "political problems require a political solution", another indication the army is unwilling at this point to crack down on behalf of the embattled government.
Abhisit may well have to dissolve parliament soon or resign. Pressure will mount on him if the protests continue to paralyse the capital's commercial heart. The government has said it does not want to give in to mob rule, but Abhisit has offered few clues as to how he will resolve the crisis.
Complicating his future, Thailand's poll watchdog has set in motion a procedure that could lead to the disbanding of his Democrat Party over suspected funding irregularities. A similar ruling ended a Thaksin-supported coalition government in 2008.
Some in the establishment, however, are believed to be manoeuvring for Abhisit to quit, paving the way for a temporary "national unity government" that would bring all parties, including the Thaksin-allied opposition, into the fold. That could take the red shirts off the streets and buy time before fresh polls are called. But Finance Minister Korn Chatikavanij said on Thursday that Abhisit had no intention of standing down.
The short answer is yes. Credit rating agencies and economists say the escalation of violence will hit tourism revenue, foreign direct investment and economic growth.
But Thailand has had 18 coups since 1932 and protests by yellow shirts, red shirts and others are a way of life, even if Bangkok has not seen such violence since 1992. Until the declaration of a state of emergency last week, Thailand along with the rest of Southeast Asia had seen a surge in foreign investment inflows, with $1.8 billion coming into Southeast Asia's second largest economy from Feb. 22 to March 7.
Stocks dived 2.7 percent on Friday, extending a 3.6 percent fall before the three-day New Year holiday. Airports of Thailand (AOT.BK) fell 5.6 percent and national carrier Thai Airways (THAI.BK) 4.9 percent. Tourism has taken a hit, with occupancy rates at hotels about a third of expectations.
In January, the central bank predicted economic growth of 3.3-5.3 percent this year. Private economists expect 4-5 percent. They say that despite the problems, the export-driven economy should perform well due to the global recovery.
It's not totally out of the question if the government teeters and the influential men in green who traditionally play a pivotal role in politics risk losing behind-the-scenes clout.
The army is well aware that another coup will not sit well with the international community and could provoke a violent response in the bitterly divided country. Some within the army may prefer the use of "soft power" to push Abhisit out and install a new leader to buy time before the next poll is held.
Analysts say large numbers of soldiers in the lower ranks and some senior officers sympathise with the red shirts. Many of the military's top brass are at the other end of the political spectrum, allied with royalists, business elites and the urban middle classes who wear yellow or pink at counter-protests and broadly back the 16-month-old government.
Adding to the mix is the question of the eventual succession to 82-year-old King Bhumibol Adulyadej, who has been in hospital since Sept. 19, and whether this might lead to a change in the balance of power in the military, traditionally closely aligned with the palace.
They are mostly supporters of Thaksin, drawing from the rural poor and increasingly from the urban working class.
Their formal name is the United Front for Democracy against Dictatorship (UDD). They wear red shirts to distinguish themselves from the pro-establishment yellow shirts.
They back Thaksin because of his welfare and rural development policies while in office from 2001-2006. Many of them believe his conviction for corruption after he was ousted in a 2006 military coup was an attempt to keep him out of politics after the coup. Not all red shirts back Thaksin unreservedly, but all are angered by the manner of his removal and believe democracy is being undermined by powerful, unelected figures.
The red shirts say Abhisit's coalition government is illegitimate because it was not elected but pieced together with the backing of the army in a "silent coup" in December 2008 after a ruling pro-Thaksin party was dissolved. It wants new elections, which it is confident the pro-Thaksin Puea Thai Party would win. (Additional reporting by Nopporn Wong-Anan in Bangkok; Editing by Alan Raybould and Alex Richardson)