SCENARIOS - Will the pro-Thaksin rally turn ugly in Thailand?

Former Thailand prime minister Thaksin Shinawatra speaks to Reuters in Dubai April16,2009. Thailand's government enacted a tough security law on Tuesday giving the military broad powers to control a planned rally this weekend by supporters of exiled Thaksin Shinawatra.

BANGKOK (Reuters) - Thailand's government enacted a tough security law on Tuesday giving the military broad powers to control a planned rally this weekend by supporters of exiled former premier Thaksin Shinawatra.

The Internal Security Act (ISA) allows the military to restrict the movement of "red shirt" protesters and act fast in the event of clashes during the rally, which marks the third anniversary of Thaksin's overthrow by the army.

Critics of the "red shirts" say they will try to provoke violence to bring down Prime Minister Abhisit Vejjajiva's fragile government while it is at its weakest point. The pro-Thaksin camp maintains the protest will be non-violent.

The following are possible scenarios linked to Saturday's rally, based on interviews with risk analysts and academics.

PROTEST TAKES PLACE, PASSES WITHOUT INCIDENT

With rifts in Abhisit's wobbly coalition deepening by the day, the "red shirts" or United Front for Democracy against Dictatorship (UDD) as they are formally known, will have little to gain by provoking violence, especially after riots in April that seriously discredited the movement.

With or without UDD pressure, Abhisit's government looks to be unravelling. Cracks are appearing, not only between coalition partners but in Abhisit's ruling Democrat party. Constant squabbles coupled with a clear lack of consensus have dented public confidence in the 9-month-old government.

Thaksin's supporters know a big show of support, without violence, would be sufficient to chip away at Abhisit's credibility. Most analysts say a peaceful rally is the most likely scenario, one that would have little impact on markets.

PROTEST TURNS VIOLENT, MILITARY STEPS IN

Critics of Thaksin, including the "yellow shirts" movement, say time is running out for the fugitive billionaire and believe he will try to orchestrate a disturbance at the rally to provoke violence and bring down the government.

The military may also need to take control given the current resentment of Abhisit by the some senior police officers after he relegated the country's influential top cop, General Patcharawat Wongsuwan, to an inactive post when he was on the verge of retirement.

The Thaksin-backed Puea Thai Party, the UDD's parliamentary arm, had warned against the use of the Internal Security Act, saying some hard-core supporters, or thugs hired to discredit the UDD, will stir-up violence to provoke a crackdown or even a coup.

Under this scenario, Thailand's stock, currency and debt markets could face aggressive selling. However, most analysts believe violence is unlikely because clashes would be unfavourable to all parties involved.

"Currently, none of the major political forces in the country have the ability -- or even willingness -- to upset the uneasy situation we have today," said Roberto Herrera-Lim, an analyst at Eurasia Group. "Our view is that this is simply a waiting game."

CLASHES TAKE PLACE, ABHISIT DISSOLVES PARLIAMENT

Pressure has been piling on Abhisit from the UDD, coalition partners and even his close aides, prompting speculation about house dissolution and new elections. However, snap polls would only favour the pro-Thaksin camp and are therefore unlikely.

Public dissatisfaction with the government's handling of the economy, the political crisis, the H1N1 virus and the insurgency in the deep south means the two dominant coalition parties -- the Democrats and the Bhumjai Thai Party -- would probably not fare well in a public vote and would therefore seek to avoid this.

House dissolution would not be a market-friendly scenario and would heighten the prospect of more political strife, with a negative impact on Thailand's $260 billion economy, the second-biggest in Southeast Asia.

VIOLENT CLASHES OCCUR, ARMY LAUNCHES COUP

Rumours are swirling about a military power grab, but in a country that has undergone 18 actual or attempted coups in 77 years of on-off democracy, this is nothing new.

Abhisit still toes the military's line and the army has sent no signal to indicate it is ready to launch another putsch.

Although the threat will always loom when there is trouble in Thailand, it is unlikely the army will risk further destabilising the country.

Should this happen, it would be the least market-friendly scenario given the abysmal performance of the last post-coup government, which employed botched economic revival measures and failed to deliver its pledge to strengthen the democratic system and root out corruption.