Sondhi Limthongkul, the PAD leader, vows to hold new rallies against the government [AFP]

The seven senior members of the People's Alliance for Democracy (PAD) were released on bail on Friday on charges of inciting unrest in connection with their five-month campaign to unseat the government.

The more serious charges, including insurrection and stock-piling weapons, had been revoked on Thursday.

As he was released from a police station in Bangkok, Sondhi Limthongkul, the head of the PAD, said: "Everything is done. There is no detention."

The charges come after months of peaceful protests turned violent. Two people died and hundreds were injured in street clashes in the capital earlier in the week.

Thailand's political crisis dates back to 2005, when the PAD started street protests against Thaksin Shinawatra, the ousted premier.

The PAD launched its latest campaign in May, sayinging that the ruling People Power Party (PPP), which is popular with the rural poor, is running the nation on behalf of Thaksin.

Turmoil had escalated on August 26 when PAD supporters beseiged the offices of Samak Sundaravej, who later stepped down as prime minister. At the time, the ciminal court issued arrest warrants for PAD leaders on charges including insurrection.

Impasse

The army has said it will not step in to end the current turmoil, although pressure has been mounting on Anupong Paochinda, the army chief, to do so.

Efforts by Somchai, who has been premier for just over three weeks, to end the campaign against the PAD have so far failed, and his government appears to have few allies left.

Chavalit Yongchaiyudh, Somchai's former chief negotiator, said in an interview with the Bangkok Post that he saw no peaceful way out.

Chavali, who resigned from the cabinet on Tuesday, said: "A House dissolution cannot solve the problem."

"The problem can be solved by three institutions - the monarchy, which remains politically neutral, the military, which appears to be not interested in intervening, and the government, which stays above the problem," he said.

Somchai, who has said he will set up a commission to investigate Tuesday's violence, has so far remained largely silent on how he will deal with the challenge.

"I am open to options from all sides ... but I have to use my own judgment on what is the most appropriate action," he said.

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