SANAA Yemeni President Ali Abdullah said on Friday he was ready to cede power, the third Arab ruler who may be forced out by popular protests which began in North Africa and have now spread into the Gulf, Syria and Jordan.
Saleh said he would cede power only into "safe hands" and Yemeni political sources said talks were under way to work out the details of a peaceful transition.
But in Syria, protests challenging the rule of President Bashar al-Assad spread across the country after security forces killed dozens of demonstrators in the south.
"The barrier of fear is broken. This is a first step on the road to toppling the regime," said Ibrahim, a middle-aged lawyer in the southern Syrian city of Deraa. "We have reached the point of no return."
Saleh's departure would present a new challenge to Western countries already embroiled in a week-old military intervention in Libya, amid fears that instability in Saudi Arabian neighbor Yemen could open the way for al Qaeda to expand its power there.
"We don't want power, but we need to hand power over to safe hands, not to sick, resentful or corrupt hands," said Saleh, who had come under intense pressure to quit since snipers fired on anti-government protesters a week ago, killing 52 people.
That bloodshed prompted a string of defections that severely weakened Saleh's position, including by military figures such as top general Ali Mohsen, as well as diplomats and tribal leaders.
A source close to Mohsen said he and Saleh had discussed a deal in which both men and their families would leave Yemen, while political sources said broader talks were underway on a political transition.
A diplomat in the capital Sanaa, however, said it was premature to discuss an outcome. "It can go either way."
In Syria, Assad's government had promised on Thursday to look at giving greater freedom to Syrians.
But there was more bloodshed after Friday prayers, with witnesses reporting at least 23 dead, including three in the capital Damascus. Information on casualties was limited and authorities restricted journalists' movements.
HAULING DOWN ASSAD'S STATUE
In Deraa, tens of thousands marched in funerals for some of those killed earlier in the week, chanting "Freedom."
In a central square, a Reuters correspondent saw protesters haul down a statue of Assad's father, late president Hafez al-Assad, before security men in plain clothes opened fire with automatic rifles from buildings.
The crowd of some 3,000 scattered under volleys of bullets and tear gas. The reporter saw some wounded helped into cars and ambulances. It was unclear how many, if any, were killed.
By evening, however, security forces appeared to have melted away, a crowd of protesters gathered again in the main square and set a government building on fire, witnesses said.
After pulling down the statue, in a scene that recalled the toppling of Saddam Hussein in Iraq in 2003 by U.S. troops, some protesters poured fuel into the broken cast and set it alight.
In the town of Sanamein, which is in the same southern area as Deraa, residents said 20 people were killed when gunmen opened fire on a crowd outside a building used by military intelligence. Syria's national news agency said security forces had killed armed attackers who tried to storm the building.
Demonstrations have also flared up in Jordan, and one person was killed on Friday during clashes between protesters calling for political reform and supporters of the pro-Western monarchy.
Jordanian Prime Minister Marouf al-Bakhit warned of unspecified consequences if similar clashes occurred.
"What happened today is definitely the start of chaos and it is unacceptable and I warn of the consequences," Bakhit told Jordanian television.
The protests were the latest to erupt since the January 4 death of Tunisian street vendor Mohamed Bouazizi, who set himself on fire in protest at his treatment by authorities.
Anger triggered by his death forced out Tunisia's ruler and swept into Egypt -- a country which has wielded huge influence on the political and religious currents of the Muslim world -- bringing down Egyptian strongman Hosni Mubarak on February 11.
"The whole system is changing," said Beirut-based commentator Rami Khoury. "Every single country without exception has to make changes."
"I think we have reached a point of no return. I don't think the Middle East will be the same. It is a new order in the making," said Fawaz Gerges from the London School of Economics.
TANKS BOMBED IN EASTERN LIBYA
A revolt against Libyan leader Muammar Gaddafi has already prompted the third Western military intervention in a Muslim country this century, after Afghanistan and Iraq.
Western warplanes bombed Gaddafi's tanks and artillery in eastern Libya on Friday to try to break a battlefield stalemate and help rebels take the town of Ajdabiyah, which commands the coastal highway linking the east and west of the country.
Rebels said they had entered Ajdabiyah from the east, Al Jazeera reported, while Gaddafi's forces held on in the west of the town.
Western countries including the United States, Britain and France began bombing targets in Libya a week ago as part of a U.N.-mandated intervention to protect civilians.
But the intensity of their firepower, along with Western capitals' expressed desire to see Gaddafi go, has drawn questions from some countries worried they had exceeded their mandate and ran the risk of killing more civilians.
The African Union said it was planning to facilitate talks to help end the war, but NATO said its operation could last three months, and France said the conflict would not end soon.
The Arab revolts are not only unseating rulers, but also threatening to reshape alliances often dominated by rivalry between Shi'ite Iran and Sunni Saudi Arabia.
In Syria, where the minority Alawite elite rule over a Sunni-majority country, protesters have chanted slogans against its alliance with Iran and the Shi'ite armed Hizbollah group in neighbouring Lebanon.
But Saudi Arabia saw its grip challenged in Bahrain and sent troops earlier this month to help crack down on protesters -- many of them from the majority Shi'ite population -- demonstrating against the ruling Sunni al Khalifa family.
Small protests broke out in Bahrain's capital Manama for a planned "Day of Rage" on Friday despite a ban under martial law imposed last week, but were quickly crushed by security forces.
The challenge to authoritarian rulers by popular protests has so far somewhat marginalized al Qaeda, which had presented its own hardline Islamist ideology as the only alternative to what it called corrupt dictatorships.
But instability in Yemen and war in Libya could provide fresh opportunities for the group. It already has a strong presence in Yemen through Al Qaeda in the Arabian Peninsula and in North Africa through Al Qaeda in the Islamic Maghreb.
"The chaos of a post-Saleh Yemen in which there is no managed transition may lead to conditions that could allow AQAP and other extremist elements to flourish," analyst Christopher Boucek wrote in the militant affairs periodical CTC Sentinel.
Yemen, which lies on key shipping routes, has often seemed on the brink of disintegration. Northern Shi'ites have taken up arms against Saleh and southerners dream of a separate state.
(Writing by Myra MacDonald; editing by Jon Boyle)