ISLAMABAD (Reuters) - Pakistan plunged toward a debilitating power struggle on Wednesday as the Supreme Court brought down a provincial government controlled by President Asif Ali Zardari's main rival, former premier Nawaz Sharif.
The court's decision to nullify the election last year of Nawaz's younger brother Shahbaz Sharif as Punjab's chief minister raised fears of a return to the political turbulence of the 1990s, a decade that ended in a military takeover.
It wiped five percent off share values on the Karachi stock exchange.
The court also effectively maintained a bar on two-time prime minister Nawaz Sharif contesting polls.
Zardari has imposed governor's rule in Punjab for two months, according to Farhatullah Babar, a spokesman for the president. With the imposition of governor's rule, the province is directly ruled by the central government through the president's appointee, the provincial governor.
Neither brother was in court, but Nawaz Sharif called for street agitation to protest a court decision he said was delivered on orders from Zardari.
I want to tell the nation that it should stand up to this lawlessness, to this judgment, to this unconstitutional judgment, to this villainous act by the president of this country, Zardari, Sharif told a news conference in Lahore.
Pakistan can ill afford the political uncertainty.
The economy is only afloat thanks to an International Monetary Fund loan, Islamist militants threaten the security of the nuclear-armed state, the war on terrorism in unpopular, and anti-American sentiment is rife.
A showdown between Zardari and two-time prime minister Sharif has been brewing since they forced former army chief Pervez Musharraf to quit as president last August.
The court's decisions take place a week ahead of elections for the upper house and the Senate.
The political impact of this decision will be extremely negative and if not handled properly this can undermine prospects of democracy in Pakistan, Hasan Askari Rizvi, political analyst based in Lahore, said.
This virtually amounts to excluding one of the major political parties from the political process.
Sharif's supporters took to the streets in Lahore and other towns across Punjab, burning tires and chanting anti-government slogans, and his party has called for protests on Thursday.
The people of Punjab are with them. It doesn't look good, said an ex-cabinet minister from a party in Zardari's coalition.
Sharif's supporters see the Supreme Court as a tool of Zardari, and Sharif has refused to recognize the legitimacy of a chief justice he regards as a Musharraf appointee.
Zardari, the husband of slain former prime minister Benazir Bhutto, is unpopular among Pakistanis because of old corruption allegations, but he is seen as pro-West and dovish toward India.
Western governments are wary of Sharif, who represents the religious conservative mainstream.
There is unfinished business to be resolved in the aftermath of last year's transition to civilian rule after more than eight years under General Musharraf.
Sharif was ousted by the coup that brought Musharraf to power in 1999. Convicted of hijacking a plane that brought the general home, he is barred from standing for election.
After returning from exile in late 2007, Sharif revived his fortunes by backing a lawyers' movement campaigning for the reinstatement of a Supreme Court chief justice who Musharraf had suspended and dismissed earlier that year.
The lawyers are gearing up for a long march, actually a cross-country convoy by hundreds of cars, to Islamabad on March 12 to mark the second anniversary of Musharraf's suspension of Iftikhar Chaudhry.
Analysts say that if Iftikhar Chaudhry were reinstated he could prevent Musharraf getting indemnity for his actions in securing his re-election and declaring emergency rule in 2007.
That in turn could cast doubt on the validity of the protection Musharraf gave Bhutto and Zardari to return from self-imposed exile without fear of prosecution for corruption and other alleged crimes.
The first step is the restoration of judges and independence of judiciary, Sharif told the news conference.
(Additional reporting by Zeeshan Haider; Writing by Simon Cameron-Moore; Editing by Valerie Lee)