The battle for Bangkok has entered a new and potentially violent phase after clashes erupted between riot police and demonstrators in the capital city Tuesday, marking the start of a more intense struggle between the embattled Thai government and protestors and opening the possibility of even more violence in the coming days and weeks.

Thailand’s political crisis is certain to deepen, as there appears to be no way out of the current deadlock. Thai society has never been so divided. Although the fault lines appear to be geographic – the South and Bangkok against the North and North-East of the country -- the main rift is between those who oppose the deposed former Prime Minister Thaksin Shinawatra, who decamped to the United Kingdom to ask for political asylum, and those who support him.

The role of Thailand’s royalty, primarily through the Privy Council headed by onetime premier and army general Prem Tinsulanonda, cannot be discounted in attempting to rid the country of Thaksin’s influence. On Tuesday there seemed to be a tacit revelation of that the movement does enjoy support from the palace when, in an unprecedented public display of royal sympathy, Queen Sirikit was quoted in the Thai press as saying she was very worried about the police's use of tear gas to disperse the protestors at parliament. She donated Bt100,000 to the Vachira Hospital to pay for demonstrators’ medical expenses.

The continuing violence has raised the possibility the Thai military will be forced to take over the country for the 18th time since World War II, the latest in September 2006 when it ousted Thaksin. In recent weeks, however, the increasingly gun-shy military has publicly vowed to stay on the sidelines despite rising concern on the part of analysts and commentators that only a coup will alleviate the violence. The demonstrators say they will remain in the street of the capital city until all of Thaksin’s protégés and influence are expunged from Thailand’s political scene.

The continuing protest, which is nearly paralyzing the government, has cut severely into investor confidence at a time when the global economic downturn is beginning to impact even the strongest Asian economies. Bloomberg reported that Thailand's key stock index has slumped 38 percent in the four months since protests began in May, and economic growth slowed in the second quarter as domestic spending eased. Default-protection costs on Thailand's external debt rose to the highest in more than six years, Bloomberg reported.

That hasn’t slowed the People’s Alliance for Democracy, the coalition of businessmen, academics and activists, who accuse the new Prime Minister Somchai Wongsawat of being a political proxy for Thaksin, his brother-in-law. The PAD is now going for broke, according to many political analysts. The arrest of two of PAD leaders, Chaiwat Sinsuwong and Chamlong Srimuang, who were detained on treason charges in for their roles in the anti-government group's late August raids on government buildings, signals a renewed campaign to attempt to topple the government. Many believe Chamlong orchestrated his own capture to fire up the PAD protestors, whose enthusiasm for the battle has waned in recent weeks.

Despite their public reluctance to get involved, soldiers were deployed on the streets after the police failed to disperse the demonstrators, although the soldiers appear to be unarmed.

Thailand’s newly appointed deputy prime minister in charge of security, the veteran politician Chavalit Yongchaiyudh, also resigned, taking responsibility for the clashes, in which one woman protester died and more than a hundred people were injured, several of them seriously. In a separate incident, a car bomb exploded outside the offices of the Chart Thai party, one of the governing People’s Power Party’s (PPP) coalition partners, killing one man. The jeep reportedly belonged to a member of the anti-government protestors.

The violence erupted suddenly, but not unexpectedly. For weeks the authorities have tried to appease or ignore the thousands of demonstrators who have been occupying Government House. But when the protestors marched from their government house base to attempt to block access to the parliament on the eve of the new prime minister, Somchai Wongsawat’s maiden speech in which he planned to outline his parties’ policies for the coming months, the security forces were ordered to dislodge them.

A fierce battle ensued when hundreds of riot police clashed with the demonstrators as they tried to clear a path through the crowd so that MPs and senators freely enter and leave the parliament. The security forces fired volleys of tear gas and lobbed stun grenades into the crowd, who reacted by hurling stones and firecrackers back. Some protesters were badly hurt in the melee, including two men who had parts of their legs blown off by exploding teargas canisters.

Several thousand protestors then regrouped and marched to the nearby police headquarters, chanting anti-government slogans, while others fought with the police. Shots were fired and steel bars thrown at the police.

“It was like a battlefield,” one of the protestors, Nualnoi, told Asia Sentinel. “The police attacked unarmed civilians without warning -- it was lucky it did not get out of hand,” she added.

The police had to use tear gas to control the situation, the metropolitan police chief, Pol. Maj-Gen. Amnuay Nimmano, later told journalists at the scene of the clashes. But the police only used tear gas, and not rubber bullets or broken glass, he insisted.

“This was a calculated action by the protest’s leaders to try to regain the upper hand,” Thitinan Pongsudhirak, director of the Institute for Strategic and International Studies at Chulalongkorn University in Bangkok, told Asia Sentinel. “They are now in the driving seat and setting the political agenda – though the only real result is likely to be further confrontation.”

The PAD has been relatively dormant in the past few weeks, as Somchai’s government seized the initiative with talk of dialogue and compromise. There has been a series of exchanges between the government and PAD leaders, according to senior sources in the PPP, often through intermediaries. A bipartisan constitutional drafting committee was reportedly set up to help defuse the tension. Somchai also agreed to take on board the PAD's call for political change through possible amendments to the 2007 charter – drawn up under the previous military government and ratified by a referendum more than a year ago.

The PPP government has been considering reviewing the constitution to make it easier for the Thaksin to return to political life. He and more than a hundred other senior members of the Thai Rak Thai party were banned from politics for five years at the same time their party was dissolved by the Constitutional Court early last year. The PAD leaders though, believe that Thai democracy has been undermined by the billionaire Thaksin and his allies. The TRT easily won the last three elections, but through massive electoral fraud and vote-buying, anti-government protestors allege. The PAD is proposing what it calls "new politics" -- which would include the appointment of most MPs.

“But dialogue doesn’t really suit the PAD, as it deprives them of their power,” Thitinan said. “This latest turn of events was intended to galvanize the movement and was meant to deliberately to provoke the authorities.”

Thitanan called Chamlong’s arrest a “cynical move by Chamlong – who is the movement’s most self-righteous and hard-line leader – to motivate the movement’s foot soldiers – the pawns in his political strategy.”

Some analysts believe the decision to escalate the violence may have been a pre-emptive move to topple Chavalit, who has been in charge of internal security for the past two weeks since he was appointed deputy prime minister. Many senior members of the army have little love for the former army chief and head of military intelligence. Others believe it just may have been a big mistake.

“It is probably all a big screw up – ala Thai style,” according to the Democrat leader, Kraisak.

What is certainly true is that the PAD leaders’ arrest and the subsequent violence have ended any attempts at mediation. After the violent clashes between the security forces and the demonstrators, Chavalit, who had been put in charge of the mediation effort, told parliament that he is now convinced that these attempts to have a dialogue with the opposition are futile.

The violence also brought to an abrupt end Chavalit’s latest stint in office. He resigned immediately after the clashes, taking responsibility for ordering the police to take stringent measures to guard the parliamentary premises and to open the way to the building, although he reportedly also ordered the police to be careful not to provoke the protestors or cause any damage.

“But (the police) actions went against the policy, although police had put in a lot of effort, causing great losses,” he said in his resignation letter to the parliamentary speaker. More ominously though, he also said his mission to restore peace to Thai society, as quickly as possible, had failed.

The demonstrators though failed to in their primary objective to stop Somchai from making his maiden policy speech although more than 300 of the country’s 621 lawmakers boycotted the event. In his speech, Somchai called for national reconciliation to end the country’s three-year political crisis.

“This government is determined to tackle economic problems and to listen to all sides to find a solution to end the crisis,” the prime minister told parliament. After his speech though, he had to slip out of parliament through the back to avoid the protesters.

“Prime Minister Somchai had to climb over side gates to the nearby Pimanmek Mansion, before boarding a helicopter to the Supreme Command headquarters,” a government official said.

After the prime minister’s meeting with military top brass at the armed forces headquarters, he announced that the government would not impose a state of emergency. Similar street violence last month triggered a two-week state of emergency in Bangkok, but the army refused to enforce it and the measure was withdrawn after it badly damaged the tourist trade and the Thai economy as a whole.

But troops have now been deployed at strategic sites throughout Bangkok, an army spokesman told journalists. This has raised fears that the military may be moving towards another coup, although “while it cannot be ruled out, a coup would seem to be a remote option at the moment,” Thitinan said.

Many of Thaksin’s supporters believe provoking a coup is indeed the PAD’s real game plan. The anti-government protestors are now demanding the dissolution of both houses of parliament.

“Giving in to protestors will not solve anything, it would only increase the chances of another coup,” said Chaturon Chaisang, a former deputy prime minister under Thaksin. “This is what the protestors want: more turmoil and conflict.”

For the time being the army chiefs continue to insist that the government needs to handle the situation and that the country’s soldiers have no place in politics. But many fear that if there is more violence in the coming days and weeks the Army chief, Anupong Paojinda may feel he has no alternative than to act to quash the social unrest for the sake of the country.