Thai troops fired at crowds of anti-government protesters in central Bangkok on Monday and demonstrators fought back with firebombs and rocks, propelling Thailand deeper into political crisis.

Near dusk, soldiers advanced into an area held by protesters near Government House in what appeared to be a final push to end demonstrations that have further hobbled a country still reeling from political chaos last year and the global financial crisis.

In one spot, some 200 soldiers lined up across a road with roughly 200 riot police behind them. The army set up roadblocks to stop red shirts from returning to the Government House area.

Protesters torched several buses on the roads leading toward them. One side of a government building was on fire, and a Thai television channel said it was caused by a firebomb. Black smoke billowed into the dusk sky.

Several thousand red shirts were still encamped at Government House. Prime Minister Abhisit Vejjajiva appeared on television urging people to leave and guaranteeing their safety.

Exiled former Prime Minister Thaksin Shinawatra, the figurehead of the protests, told CNN that people had died.

Many people are dying ... They even take the bodies on the military trucks and take them away, he said.

The Emergency Medical Institute of Thailand reported that 94 people, including soldiers, were injured in Monday's clashes, including 24 who were still hospitalized.

No deaths were reported.

The clashes came two days after protesters forced the cancellation of a high-profile Asian summit in Thailand, a big embarrassment for Abhisit, whom they have been trying to oust. He took office only in December.

I believe the darkest days in Thailand's history are yet to come as we see no swift solution to ongoing divisiveness, said Prinn Panitchpakdi, a CLSA Asia-Pacific analyst.

Standard & Poor's and Moody's, which already have a negative outlook on Thailand's sovereign ratings, said on Monday the renewed political unrest increased the risk of a downgrade.

USE FORCE IF NECESSARY

The violence started before dawn, much of it near one of the city's central traffic hubs, the Din Daeng junction, which red shirt demonstrators had blockaded. Abhisit had declared a state of emergency in Bangkok on Sunday.

General Songkitti Chakabakr, Thailand's top military commander, said in a televised statement on Monday the committee charged with restoring order would strive through every peaceful means to bring things back to normal as soon as possible, but it reserved the right to use force if necessary.

Thailand's intractable political divide pits royalists, the military and the urban middle class against a less well-off rural majority loyal to Thaksin and his populist policies.

Last year, politicians backed by the red shirts were in power and royalist yellow shirt supporters of those now in government held nearly nonstop protests in the capital, culminating in a week-long occupation of Bangkok's main airports.

The political strife died down for a while after Abhisit came to office in December through parliamentary defections Thaksin supporters say the army engineered. They demand new elections, which they would be well placed to win.

Protests flared anew after Thaksin, ousted in a 2006 coup and living in exile to avoid jail on a corruption conviction, set a deadline for Abhisit to resign by April 8 -- the day before Thailand was to host the East Asia Summit in Pattaya.

His supporters descended on the beach resort south of Bangkok. Abhisit's strategy of treating them gently to avoid inflaming passions backfired when they smashed their way through a cordon of troops into the venue, forcing an evacuation of leaders by helicopter.

Now, with fires blazing in the street and smoke from burning buses and a building rising over the city of some 12 million, a political solution appears as distant as ever.

The flare-up came at the start of the Thai New Year holiday, and even as soldiers and protesters battled in the streets, in other parts of town squealing children and shrieking adults blasted each other with waterguns to celebrate the three-day Thai new year.

Abhisit seems intent on sweeping the protesters out of city before the new year festivities end, preferably with a minimum of casualties, to burnish his credibility after the summit fiasco.

He appeared on television late on Sunday, flanked by military commanders, to say a coup was not going to happen.

Thailand has seen 18 coups since 1932, and the military often has the final say in Thai politics, sometimes with the blessing of the revered king.

The chaos in the capital will deal another blow to tourism, one of Thailand's biggest foreign exchange earners. Several countries have already warned their citizens against travel.

(For additional stories on the Thailand crisis see [nSP470159])

(Additional reporting by Vithoon Amorn, Kittipong Soonprasert, Panarat Thepgumpanat and Andrew Marshall; Writing by John Ruwitch and Bill Tarrant; Editing by Alan Raybould)

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