SINGAPORE - Political unrest flared again in Thailand this week, after protesters loyal to former prime minister Thaksin Shinawatra forced the cancellation of an Asian summit, and two people were killed in violence in Bangkok.
Prime Minister Abhisit Vejjajiva declared a state of emergency in the capital, and on Tuesday the protesters peacefully ended their three-week siege of Government House.
Following are possible scenarios for what could come next, and their implications for markets:
ABHISIT HOLDS ON BUT THAILAND REMAINS TURBULENT Abhisit's government did not win a mandate at the polls -- it was formed in December after yellow shirt royalist protesters occupied Bangkok's airports and the courts dissolved the previous ruling party which was loyal to Thaksin.
But he easily survived a no-confidence vote in parliament last month, and while the cancellation of the Asian summit was a deep embarrassment for him, he restored some confidence by bringing the Bangkok unrest to a relatively peaceful resolution.
This means his government looks likely to hang on to power for the moment. But the red-shirted pro-Thaksin protesters, supported by millions of rural poor, are unlikely to give up their struggle to disrupt the government and force elections.
The most likely scenario, analysts say, is that a weak government, which should be focusing on dealing with the global economic crisis, will remain distracted by political unrest.
This deep-seated crisis has been going on for three years now, and although the red shirts are dispersing, they are not giving up, they are not surrendering, said Danny Richards, senior economist at the Economist Intelligence Unit in London.
Thailand would slip further behind regional peers as an attractive place to invest. The baht would weaken and the stock market, southeast Asia's worst-performing bourse so far this year, will remain weighed down by political risk. Sovereign agencies and political risk analysts have been steadily downgrading their outlook for Thailand.
ABHISIT'S GOVERNMENT CONSOLIDATES POPULAR SUPPORT
A less likely possibility is that Abhisit seizes the moment after ending this week's unrest and consolidates popular support. Many ordinary Thais are heartily sick of the country's political turmoil and yearn for stability and efficient government.
If enough of them are prepared to give him a chance, and with Thaksin losing face after the protests fizzled out, the Abhisit administration may start to look less shaky.
Signs that he is achieving broader popularity would be bullish for stocks and the baht. If he calls elections and emerges with a strengthened mandate, that would also be positive for markets, analysts say.
S&P said its negative outlook for Thailand's sovereign ratings could revert to stable if investor confidence sees a strong revival, likely on indications that the Thai domestic political situation is returning to a sustained equilibrium.
Thailand's finance minister said this week the government will expand its fiscal stimulus package to try to restore foreign and domestic confidence. If enough of that money is used in projects that benefit the rural masses, they may be won over.
And with the IMF and ratings agencies saying Thailand can safely borrow plenty more without causing concern, intelligent economic policymaking could help Abhisit buy his way to greater support while also tackling the impact of the financial crisis.
PRO-THAKSIN PARTIES REGAIN POWER
Given Thaksin's continued support among the poor, parties backing him could well return to government in an election if Abhisit miscalculates or is forced into early polls. But the military, the judiciary and the royalist yellow-shirted mobs would almost certainly resume efforts to oust the government.
The result could be another military takeover (Thailand's 19th actual or attempted coup since 1932), a return to mass protests on the streets by the yellow-shirts, or another judicial intervention that would leave Thailand's dispossessed more embittered and angry than ever.
Any of these developments would be deeply bearish for the baht and Thai stocks. Foreign and domestic investment in the economy would be further hit, and sovereign ratings would almost certainly be downgraded. Thailand would remain locked in political crisis, with divisions only widening.
NATIONAL UNITY ADMINISTRATION EMERGES
Analysts see a small chance that some kind of national unity administration could emerge from the turmoil.
This could happen if Abhisit reaches some kind of deal with Thaksin and his supporters, perhaps by offering to drop corruption charges against the ousted former premier and allowing him to return from self-imposed exile. But Abhisit has said he will not negotiate with his political nemesis.
Alternatively, a unifying political figure could emerge with the clout to broker a compromise among Thailand's competing forces. This seems a long way off.
Kristina Kazmi, Asia-Pacific analyst at IHS Global Insight in London, said that for Thailand to return to long-term stability it would need to amend the constitution, which leaves elected governments too vulnerable to being ousted by mob rule.
Agreement would also have to be reached on the proper role of the military and the monarchy in Thai politics.
THE WILD CARD -- ROYAL SUCCESSION
One unifying figure is King Bhumibol Adulyadej, widely respected by Thais whatever their political affiliation.
But while the king is revered, the role of the monarchy in Thai politics is a deeply divisive issue at the heart of the crisis. Royalists in the yellow camp support an interventionist monarchy, while many of Thaksin's supporters resent the power of unelected Thai elites.
Bhumibol's son and presumed heir, Crown Prince Vajiralongkorn, commands little of his father's popular support. And with the 81-year-old king facing regular health scares, the issue of royal succession could erupt at any moment.
Because of Thailand's lese majeste laws, public discussion of the monarchy's role in politics is banned. But privately, many Thais say they fear the country's divisions could worsen if the king dies, with a risk of violence between competing factions.
That would be the most bearish scenario of all for Thailand.