* Government says avoiding confrontation
* Protesters mingle with police at flashpoints
* Army says staying out of political issue (Adds comment from prime minister, analyst)
By Panarat Thepgumpanat
BANGKOK, Dec 3 (Reuters) - Thailand’s government ordered police on Tuesday to stop confronting protesters demanding the resignation of the prime minister, raising hope that days of political violence may end, but the leader of the campaign said the fight would go on.
The protesters opposing Prime Minister Yingluck Shinawatra had been besieging various government buildings, including Government House, the complex that houses her offices.
After days of firing teargas and rubber bullets to hold them off, police handed out roses to flag-waving protesters after the barricades were brought down. The protesters mingled with police, shouted slogans and left peacefully.
“The current political situation of our country has yet to return to normal, although it has begun to ease up,” Yingluck said in a short televised statement, again stressing she wanted the security forces to avoid confrontation and loss of life.
The protests were the latest eruption of conflict between the Bangkok-based establishment and forces loyal to Yingluck and her brother, former premier Thaksin Shinawatra.
Five people have been killed in clashes since the weekend and scores hurt. A heavy-handed crackdown would have raised questions about the government’s survival and the possibility of the military stepping in to restore order.
Protest leader Suthep Thaugsuban said the campaign against what he called the “Thaksin regime” would continue.
Hundreds of demonstrators still occupy the Finance Ministry and a state administrative centre, but it remains unclear if Suthep will be able to motivate his people again. Police estimated that only 9,400 were still on the streets, including 5,500 at Democracy Monument, a roundabout in the old city that has been their base.
Thursday is the birthday of much-revered King Bhumibol Adulyadej and the protests are unlikely to continue on what is traditionally a day of prayer and celebration.
“It’s a ceasefire, they don’t want to crush each other just before the king’s birthday. This is out of respect,” said Nakarin Mektrairat, a political analyst at Bangkok’s Thammasat University. “The next step is negotiations, but what will be negotiated, nobody knows.”
The government said it wanted to avoid more violence and ease the tension for the king’s birthday.
“The government is still doing its job. This morning we had a cabinet meeting as usual,” Deputy Prime Minister Pongthep Thepkanchana told Reuters.
“We haven’t given up, but today the police have backed off because we see the protesters just want to seize these places as a symbolic action, so we want to compromise.”
Yingluck said she wanted to open talks with the protesters, academics and business people to discuss political reform and find a democratic solution.
The demonstrators celebrated what they called a partial victory even though the government they hate remains in place.
“We will fight on until the Thaksin regime has been driven out,” Suthep told his supporters.
Suthep had vilified the police in a speech on Monday and said the protesters would capture their city headquarters. On Tuesday, city police chief Kamronvit Thoopkrachang said his men would not resist.
Kamronvit is close to Thaksin, himself a former policeman and then a telecommunications tycoon, who became Thailand’s most popular politician with measures to help the urban and rural poor.
Suthep is a former deputy prime minister of a government bitterly opposed to Thaksin that ordered the military to put down pro-Thaksin protests in 2010. About 90 people were killed.
Yingluck’s government came to power with a landslide election victory in 2011.
Thaksin was ousted by the military in a 2006 coup, but army chief Prayuth Chan-ocha told reporters the army was not getting involved this time: “This is a political problem that needs to be solved by political means. However, we are monitoring from a distance.”
Thai consumer confidence has been hurt by the protests, falling in November to its lowest level since February 2012. . That, plus cancellations by tourists, could add to the problems of an economy struggling with the weakness of global export markets.
Thai financial markets have fallen sharply since the protests began more than a month ago in opposition to a government amnesty bill that would have cleared Thaksin of a graft conviction and allowed him back from self-imposed exile.
However, the baht currency was steadier on Tuesday at around 32.20 to the dollar, while the stock market rallied 0.6 percent.
Thaksin’s opponents hold considerable power and influence, among them wealthy conservatives, top generals, bureaucrats, royalists and many members of the urban middle class.
Many of them see Thaksin as a corrupt, crony capitalist who manipulates the masses with populist handouts and is a threat to the monarchy, which he denies.
He is adored by the poor who would be outraged to see Yingluck’s government removed. Yingluck said on Monday she was willing to explore every possibility for a peaceful solution. Her party would probably win any new election.
Suthep, 64, who resigned as an opposition Democrat party lawmaker to lead the protests, wants a vaguely defined “people’s council” to replace the government. Yingluck said that was unconstitutional. (Additional reporting by Apornrath Phoonphongphiphat, Kochakorn Boonlai, Martin Petty and Andrew Marshall; Writing by Robert Birsel and Alan Raybould; Editing by Raju Gopalakrishnan and Ron Popeski)