By Apornrath Phoonphongphiphat
BANGKOK, Dec 27 (Reuters) - Thailand's powerful army chief refused on Friday to rule out military intervention to defuse an escalating political crisis, the latest blow for a government determined a February election will go ahead despite deadly clashes with protesters.
General Prayuth Chan-ocha said "the door was neither open nor closed" when asked whether a coup would happen, a marked shift from the strong denials the armed forces routinely make.
"Anything can happen," Prayuth told a news conference in Bangkok. "It depends on the situation ... we are trying to do the right thing, in a peaceful way and we urge negotiations."
The general's comments represent a major setback at a critical time for Prime Minister Yingluck Shinawatra, who is under attack from opponents determined to overthrow her and weaken the influence of her self-exiled brother, former premier Thaksin Shinawatra.
She has called an election for Feb. 2, which her Puea Thai Party is almost certain to win, but anti-government protesters have vowed to stop the poll. The Election Commission (EC) also asked for a postponement after violent clashes on Thursday.
The political deadlock and violence have become all too familiar in Thailand, where the military have staged or attempted to stage 18 coups in 81 years of democracy.
Southeast Asia's second-biggest economy is divided broadly between those who love Thaksin, such as the rural poor in the populous north and northeast, and those who loathe him, a group that includes Bangkok's conservative elite and middle class.
The events of the past two days suggest powerful forces could again be at work to undermine Thaksin's populist political machine, which has won every election since 2001.
Yingluck has been in her northern strongholds this past week rallying support ahead of a ballot she is determined will go ahead, aware her caretaker government could be exposed to an escalation of street protests, legal challenges and the possibility of a military overthrow.
Rumours of a coup have swirled in recent weeks. Three sources with ties to the military have told Reuters recently that two of Prayuth's still-influential predecessors had expressed their support for the anti-government protest movement.
HERO AND VILLAIN
The protesters want the suspension of what they say is a fragile democracy subverted by Thaksin to enhance the business empires of his family and friends, using cheap healthcare, micro-loans and state subsidies to buy off the poor.
They draw strength from the south, as well as Bangkok's establishment of old-money families, the royalist bureaucracy and generals who despise Thaksin's rise.
Fifty-three parties have signed up to run in the polls. The EC said on Friday it would seek talks with the government and demonstrators to break the deadlock.
"We expect to have a solution before the New Year comes," commissioner Somchai Srisuthiyakorn told reporters.
The government was initially counting on the army for its cooperation, even though it overthrew Thaksin in 2006.
Deputy Prime Minister Surapong Tovichakchaikul asked the military on Friday to provide security for election candidates and voters but there has been no public response.
Instead of an election, the protesters want an appointed "people's council" to replace Yingluck and introduce political reforms before any future vote.
Their wider aim is to neutralise the power of the Shinawatra family. Muddying the waters further, the main opposition Democratic Party says it will boycott the vote.
The weeks of protests had been largely peaceful, even though as many as 200,000 people have been on the streets. A hard core of about 500 protesters, some carrying knives and slingshots, were behind Thursday's violence.
The Public Health Ministry said two people, including a policeman, had been killed by an unidentified gunman and 153 people wounded, 39 of them police, in Thursday's clashes.
The crisis is starting to drag on the economy. The Thai baht plumbed close to four-year lows this week and Thai stocks fell two percent after Thursday's violence.
The Finance Ministry cut its growth forecast for 2013 on Thursday, due in part to the political unrest, and 2014 forecasts are also in jeopardy.
The first two years of Yingluck's government had been relatively smooth until a blunder by Puea Thai in November, when it tried to push through an unpopular amnesty bill that would have exonerated Thaksin from a 2008 graft conviction he says was politically motivated. (Additional reporting by Jutarat Skulpichetrat; Writing by Martin Petty and Paul Tait; Editing by Robert Birsel)