Violence hits Pakistan as ruling parties squabble

By Jerry Norton

ISLAMABAD (Reuters) - Suicide blasts and sinking financial markets added pressure on Pakistan's government to tackle the nation's mounting problems on Thursday after President Pervez Musharraf quit but a split threatens to tear the coalition apart.

Assassinated prime minister Benazir Bhutto's widower, who heads the largest party in parliament, emerged as a likely candidate to become the next president of nuclear-armed Pakistan, as the second biggest party in the coalition threatened to pull out.

Then, in the afternoon, the country's newscasters turned their attention from political speculation to breaking news of one of the country's deadliest-ever bomb attacks.

Two suicide bombers blew themselves up outside Pakistan's main defence industry complex as workers were leaving at the end of their shift, killing 59 people, a hospital official said.

The Pakistani Taliban later claimed responsibility for the carnage.

Allies and investors had hoped close U.S. friend Musharraf's resignation on Monday would bring a quick end to political wrangling and a shift of focus towards tackling increasing violence and economic problems. That now appears unlikely.

The coalition's second biggest party, that of former prime minister Nawaz Sharif, is threatening to quit the alliance unless a decision is taken on Friday to restore judges dismissed by Musharraf last year.

Another divisive issue is likely to be the question of the next president. Bhutto's Pakistan People's Party (PPP), which leads the coalition, is proposing her widower, Asif Ali Zardari.

"The majority of the party thinks that Asif Zardari should be president," said a Bhutto party spokeswoman, Farzana Raja, adding a decision on the party's candidate was expected on Friday.

Under the constitution, a new president should be elected by members of provincial assemblies and the national parliament within 30 days of Musharraf's resignation.

Pakistani stocks and the rupee strengthened on Monday and Tuesday on the news Musharraf had resigned.

But both started to weaken on Wednesday as instead a showdown loomed within the coalition over the judges. On Thursday, stocks finished nearly 3 percent lower and the rupee closed down by more than 2 percent against the dollar.

Pakistan's stock market, which rose for six consecutive years to 2007, and was one of the best-performing markets in Asia in that period, has fallen about 27 percent this year.

Investors said they were worried political turbulence would set off rating downgrades by Standard & Poor's and Moody's.

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