BANGKOK (Reuters) - Thailand’s army chief called on Monday for early elections, adding to pressure on Prime Minister Abhisit Vejjajiva whose party may face prosecution over funding activities.
The call came after weekend protests left 21 dead and 800 injured and although there was no violence on Monday, protesters circled the capital and still occupied their bases in Bangkok, one near a major shopping center.
“The current issue now is about dissolution of parliament, so my understanding is we just need to dissolve the House. But how long it will take before the house dissolution, that depends on the result of the negotiations,” Thai army chief Anupong Paochinda told a news conference.
Abhisit himself has said he could dissolve parliament by the year-end, a move that has not satisfied “red shirt” protesters, supporters of former premier Thaksin Shinawatra, who want him to quit immediately and leave the country.
Thailand’s Election Commission added to pressure on Abhisit when it ruled that his Democrats Party could face prosecution over funding irregularities, cheering anti-government protesters who marched in Bangkok after a weekend of violence.
Although the proceedings in the Supreme Court could take months, if a prosecution is launched, a similar measure was used to oust the government backed by Thaksin in 2008.
“Red shirt brothers are celebrating because this could lead to the end of the Democrats Party,” activist Mattawut Saikua told reporters as tens of thousands chanted “Abhisit, get out.”
The weekend protests triggered a selloff on Thailand’s stock market and the prospect of further political uncertainty and more violence shocked investors who had pushed billions of dollars into Thailand.
“Till a week ago we were very bullish on Thailand,” Piyush Gupta, Chief Executive Officer of DBS, Southeast Asia’s largest bank, said in Singapore. “After the weekend, bets are off.”
Abhisit himself offered few clues as to how he would resolve the five-year-old crisis that has pitted Thailand’s rural poor, many of whom support ex-premier Thaksin Shinawatra, ousted in a 2006 coup, against the metropolitan elite.
The mood among the thousands of protesters, circling the city on trucks, scooters and “tuk-tuk” taxis, remained defiant.
Abhisit, in a televised news conference, termed some of the protesters “terrorists, using their innocent fellow citizens who came to call for democracy, to incite unrest to bring a significant change in the country”.
The Bangkok Post daily, citing unnamed sources, said Abhisit could dissolve parliament in six months, three months sooner than his most recent proposal. He has in any case to call an election by end-2011.
Many senior officers are averse to allowing Thaksin’s supporters back into power, but many in the ranks who come from the same poor groups as the red shirts sympathize with them.
Saturday’s fighting, some of it in well-known Bangkok tourist areas, ended after security forces pulled back late in the night. The capital has since been calm, while authorities ponder whether to renew a potentially bloody crackdown on the month-long protests or make some concession to demands for fresh polls.
Thailand’s monarchy, which has intervened in past crises, has so far been silent. King Bhumibol Adulyadej, 82, has been in hospital since September.
Analysts said the impasse could continue even if new elections were held.
“It is at a point of no return, unless the government dissolves parliament,” said Charnvit Kasertsiri, a prominent political historian and former rector of Thammasat University. “That could cool things off for a bit but even that won’t mend the rift and fix the fundamental problem of power sharing.”
Bond yields fell as investors bet a central bank interest rate rise would be delayed if political events derailed the economic recovery.
“We believe that damage from the political turmoil over the weekend is significant enough to make the monetary policy committee hold its breath for the policy hike,” said Thammarat Kittisiripat, an economist at Tisco Securities, who now expects a quarter point interest rate increase in June rather than April.
Risk aversion sent Thailand’s five-year credit default swaps (CDS), which insure against debt default, 5 basis points higher to 105/111 basis points, the most since March 3.
The stock market closed down 3.64 percent and has now shed the bulk of its gains since the start of the year.
Prapas Tonpibulsak, chief investment officer of Ayudhya Fund Management, expected stocks to fall up to 10 percent in the near term.
“It’s going to hurt stock market sentiment for sure because the scale of the clashes is beyond expectations. Tourism and related businesses will be the first to be hit,” he said.
Shares in national carrier Thai Airways fell nearly 14 percent and Airports of Thailand, the main airport operator, was down 4.73 percent.
Tourism — which accounts for 6 percent of the economy and directly employs 1.8 million people — is already suffering, especially after the scenes of heavy fighting in Khao San Road, a magnet for budget travelers in the old town.
More than 100 charter flights had been booked to bring in Chinese tourists for Songkran, the Thai New Year holiday which runs from April 13 to 15. Around 70 had been canceled before the weekend and all have now been scrapped.
Vincent Ho, associate director of Fitch’s Asia Sovereign ratings, said Thailand’s fiscal position had deteriorated since the start of the global economic recession and could worsen.
A sharp drop in tourism revenues would add to fiscal pressures at time when the government is expected to maintain spending, particularly if elections are called.
Additional reporting by Vithoon Amorn and Viparat Jantraprap in Bangkok and Umesh Desai in Hong Kong; Writing by David Chance and Alan Raybould; Editing by Nick Macfie