Musharraf calls for reconciliation

By Zeeshan Haider

ISLAMABAD (Reuters) - Pakistan's President Pervez Musharraf, under mounting pressure to resign, called on Thursday for reconciliation to tackle economic problems and Islamist militancy.

But Musharraf's appeal apparently failed to check coalition government attempts to force him from power, with coalition officials saying preparations to impeach the president were on track.

Musharraf, speaking in a televised Independence Day address, neither referred to the plan to impeach him by the coalition led by the party of assassinated former Prime Minister Benazir Bhutto or to the calls for him to step down. y also did not refer to the calls for him to step down.

"If we want to put our economy on the right track and fight terrorism then we need political stability. Unless we bring political stability, I think we can't fight them properly, he said.

"Political stability, in my view, can only be brought through a reconciliation approach as opposed to confrontation," the former chief and a firm U.S. ally said in his first public comments since the coalition announced its impeachment plan last week.

Musharraf has been at the centre of a political crisis since last year that has heightened concerns in the United States and among its allies about the stability of Pakistan, a nuclear-armed Muslim state that is also a hiding place for al Qaeda leaders.

Musharraf seized power in a 1999 coup but has been isolated since his allies lost a February election. Speculation has been rife that he would quit rather than face impeachment, though his spokesman has denied that.

The uncertainty is unnerving investors, with the rupee setting a new low of around 75.05/15 to the dollar on Wednesday and stocks hovering near two-year lows. Referring to the rupee, Musharraf said the flight of capital out of the country had to be stopped.

Financial markets were closed on Thursday.

ERA OF REPRESSION OVER

Musharraf's popularity began to evaporate last year when he clashed with the judiciary and imposed a brief period of emergency rule to ensure another term.

Hours after Musharraf spoke, Prime Minister Yousaf Raza Gilani, a senior leader of Bhutto's party, said in his speech to mark 62ns Independence Day his government believed in reconciliation between political parties.

Gilani did not mention Musharraf, or respond to his appeal, but in a veiled reference to him said: "The era of repression is over forever. Dictatorship has become a tale of the past."

Former prime minister Nawaz Sharif, who was toppled by Musharraf in 1999, said his usurper must face the consequences of his actions.

"If someone breaks constitution, breaks laws...should he be rewarded or punished?" he asked while addressing a rally in the eastern city of Lahore.