SANAA (Reuters) – Huge crowds in Sanaa and other Yemeni cities demanded on Friday that President Ali Abdullah Saleh leave after months of popular tumult that has brought the Arab world's poorest country close to economic meltdown.
But in a defiant speech to thousands of flag-waving supporters, Saleh declared: "We will confront a challenge with a challenge."
Two people were killed and 15 wounded when troops shot at a throng of protesters in Ibb, a city south of Sanaa, medics and witnesses said. The overall protest death toll already tops 160.
Saleh, a wily political survivor, has clung to power despite defections from politicians, army officers and tribal leaders.
Armored vehicles, troops and even military academy students with batons deployed in Sanaa to contain a sea of protesters stretching seven km (four miles) down a main street in Sanaa.
"We are steadfast, you leader of the corrupt," anti-Saleh demonstrators chanted. "Peaceful, peaceful, no to civil war."
The bodies of 13 protesters killed on Wednesday were lined up in front of the speaker's platform. One was a soldier from forces loyal to General Ali Mohsen, who has broken with Saleh.
Saleh, addressing his supporters, described protesters as "saboteurs." He advised whoever wanted power to use the ballot box and "stop playing with fire."
Saleh offered a "constructive dialogue" with opposition parties, but did not promise to sign a Gulf Arab plan to which they have already agreed. Under the proposal, Saleh would step down in 30 days, rather than when his term ends in 2013.
Many of the youthful anti-Saleh protesters had also denounced the deal mediated by the six-nation Gulf Cooperation Council (GCC) because it would give the president immunity from prosecution.
The United States and its European allies urged all parties to sign and implement the agreement, but GCC member Qatar pulled out on Thursday, citing "stalling...and lack of wisdom."
Shadi Hamid, director of the Brookings Doha Center, said Qatar's move would make little difference. "The GCC fell short. They were not able to persuade Saleh to give up power, so I think we're back at square one now," he told Reuters.
The prolonged conflict has disrupted oil output and crippled Yemen's already struggling economy.
"If the problem persists, the government will be unable to meet the minimum needs of the citizens. The situation will pose a catastrophe beyond imagination," Oil Minister Amir al-Aidarous told parliament, according to the official news agency Saba.
He complained that political unrest and sabotage of oil and gas pipelines had exacerbated energy shortages.
"Several oil companies have quit the country and the refineries in the southwestern governorate of Aden came to a standstill a week ago," Aidarous said.
Parliament decided to call a meeting with the cabinet to discuss the energy crisis and shortages of gas, diesel and gasoline as well as persistent power cuts, Saba reported.
It quoted Trade and Tourism Minister Hisham Sharaf as saying the protests, which began in late January, had cost the economy $5 billion, or about 17 percent of 2009 gross domestic product.
Gunfire erupted in Taiz, Yemen's third city, when security forces tried to bar protesters from going to a main street to perform prayers there on what they call a "Friday of Decision." Saleh supporters were calling it a "Friday of Unity."
Armed tribesmen killed three soldiers in an attack on a military vehicle taking food to a checkpoint. The soldiers were from a unit loyal to Mohsen, the general who has defected.
Many tribesmen have also deserted Saleh. Thousands from the formidable Kholan tribe, apparently not armed, joined the demonstration in Sanaa. "We will stand with the opposition and support it until the regime leaves," Sheikh Bakil al-Sufi, their leader, told protesters. "Say it loudly: victory or death."
In his sermon, cleric Mohammed al-Fashiq urged the military to stop obeying Saleh. "To all the army leaders and all those who stand with the tyrant, fear God and join the revolution."
International alarm has mounted over instability in Yemen, home to an ambitious wing of al Qaeda, whose leader has sworn vengeance for the killing by U.S. forces of Osama bin Laden.
"The United States is deeply concerned by recent violence throughout Yemen, and joins European Union High Representative (Catherine) Ashton in strongly condemning these troubling actions," State Department spokesman Mark Toner said.
Calling on all parties to sign the GCC deal for Saleh's departure, he said: "This transition must begin immediately."
France, which called for the agreement to be signed without delay, deplored "the excessive use of force against demonstrators" and urged Yemeni authorities to protect them.
(Additional reporting by Erika Solomon and Sara Anabtawi in Dubai and John Irish in Paris, writing by Alistair Lyon; editing by Ralph Boulton)
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