BANGKOK – Thailand plans to hold a national referendum to end a political crisis over street protests against the government, Prime Minister Samak Sundaravej said on Thursday after rejecting calls to quit.

Leaders of the three-month old campaign in Bangkok to oust Samak dismissed the plan, signalling that political uncertainty would continue to beset the Southeast Asian nation.

Samak, desperately seeking a way to end the crisis that has paralysed his government, said in a radio broadcast that he would urge the Senate to pass a pending referendum law quickly.

'The campaign will last for a month in which both sides can do whatever electioneering they want,' he said, adding that the thousands of activists who have barricaded themselves within his official compound could stay there during this period.

But in an another apparent rebuff to Samak's plans, Senate President Prasobsuk Boondej said he did not believe a vote, even a rushed one, would end the crisis.

'The current situation needs an immediate solution to defuse it. We can't afford to wait for the referendum law to pass,' he told reporters.

The anti-government People's Alliance for Democracy (PAD), a mainly middle class grouping of royalists and businessmen whose activists took over the prime minister's offices 10 days ago, called the plan a delaying tactic to keep Samak in office.

'The referendum will not solve anything,' PAD spokesman Parnthep Pourpongpan said.

The PAD accuses Samak of being an illegal proxy for former premier Thaksin Shinawatra, ousted in a 2006 coup and now in exile in London. Thaksin is widely admired by the poor and in the countryside but despised by Bangkok's middle class.

Earlier, Samak dismissed talk that he would quit or call a snap election to defuse the protests.

'I will not jump ship. I will be in control,' he said.

The PAD vowed to press on until Samak was gone.

'As long as he insists on staying on, we will not go anywhere. It doesn't matter how many days or years, or even into the next life,' PAD leader Sondhi Limthongkul told supporters.

FINANCIAL UNCERTAINTY

Thailand's five-year CDS
THAILD5UA
GFI{QR}- insurance-like contracts that protect against default – widened by 4 basis points (bps) to 144 bps on Thursday. The contract is now some 25-30 basis points wider than when political problems began.

The government said it was still putting finishing touches to the referendum plan, but Thailand's beleaguered stock market took the proposal as a positive sign and reversed losses earlier in the day to end 0.76 percent higher
.SETI{QR}.

The crisis has taken a toll on Thai stocks and the baht, already buffeted by inflation and a global economic slowdown.

'On the referendum, it might be possible that it helped lift sentiment in the sense that there could be less violence,' said Chai Jirasevenupraphund, an analyst at Capital Nomura Securities.

One minister said the referendum could take the form of a national vote of confidence, which analysts said Samak's government was certain to win on the back of its solid support among poorer Thais in the countryside. 'It may look genuine, but it also appears to be a tactic to buy time,' political commentator Sukhum Nualskul said.

Economist Sin Beng Ong at JPMorgan said the philosophical difference between the PAD and the government meant there was unlikely to be any resolution to the crisis soon.

'Growth will continue to be affected by these tensions and politics could derail what had been an incipient recovery in domestic demand in July following the decline in energy prices.' Samak, 73, said in his morning broadcast that it was time for Thais to choose sides. 'I want to avoid bloodshed. I want to avoid a crisis,' he said, calling the PAD a lawless mob.

'The rest of the country must decide if they will join them.'

He declared emergency rule this week after clashes between his supporters and anti-government protesters killed one man and injured 45, but the army has refused to use force to evict the protesters, saying it would only make the situation worse.

While that was interpreted as a rebuff to the government, a sputtering strike by public sector employees at utilities, the railways and airports has not helped the PAD's cause.

Besides the referendum, analysts say various other scenarios are also possible, including Samak calling a snap election as a last resort, or caving in to the protesters and resigning.

Another possibility is revered King Bhumibol Adulyadej intervening in the crisis. Such a move would be unlikely to favor the government, even though it would be couched in nuanced terms, espousing the need for national harmony and stability.

(Writing by Raju Gopalakrishnan; Editing by Darren Schuettler and Paul Tait)