Mr Somchai began an urgent cabinet meeting in the northern city of Chiang Mai amid Thai media reports that he was considering a state of emergency to end increasingly violent anti-government protests in Bangkok.

Rumours of the army preparing to launch a coup swept the capital.

'They are 100 percent on standby,' a high-ranking former military officer told Reuters.

Thailand's three-year-old political crisis has intensified since the People's Alliance for Democracy (PAD) began a 'final battle' on Monday to unseat a government it accuses of being a pawn of former leader Thaksin Shinawatra, ousted in a 2006 coup.

A PAD blockade of Bangkok's Suvarnabhumi airport, a major Asian air hub where all flights were cancelled, entered its third day, stranding thousands of tourists.

Protesters also laid siege to the old Don Muang airport, shutting what is a big domestic hub and severing air links to the city of 8 million people.

'We appreciate this has affected private business, but the cause of the problem is this government,' PAD leader Somsak Kosaisuk told reporters at Don Muang.

'We know this government is nearing its end,' said Mr Somsak, whose group defied a Wednesday night court ruling ordering it to cease the airport protests.

Coup rumours

Mr Somchai said cabinet would consider unspecified 'measures' against the PAD, fuelling speculation he will declare a state of emergency in Bangkok. However, as with the last emergency rule in September, the army appears reluctant to move against the PAD.

'If the government insisted on dispersing the crowd, the army will meet again to find new measures. We already have a contingency plan,' Colonel Sunsern Kaewkumnerd told reporters.

Addressing the nation on Wednesday night, Mr Somchai said his government was democratically elected and would continue to work for the 'good of the country' despite PAD claims he is simply a front-man for his brother-in-law, Thaksin.

Mr Somchai's refusal to call a snap election, as army chief Anupong Paochinda said he should on Wednesday, intensified speculation of an imminent coup.

Gen Anupong has repeatedly said he would not take over, arguing the army is powerless to heal the fundamental political rifts between the Bangkok elite and middle classes who despise Thaksin, and the rural and urban poor who love him.

But one military source said army, navy and air force top brass were locked in talks late into the night, debating whether to launch what would be the 19th coup or attempted coups in 76 years of on-off democracy.

There were signs that the latest surge in violence could backfire against the PAD, with newspapers that have indulged it in the past appalled by the airport disruption.

'This is not civil disobedience. It's the PAD holding travellers hostage,' the Nation said in an editorial.

'With the military caught in the middle and reluctant to use force either to end the airport blockade or remove the current government, Mr Somchai Wongsawat's administration is looking like a bigger lame duck by the hour,' it said.

Tension has been rising across the country.

A rival pro-government group has threatened to hit the streets against the PAD, and there were reports of gunfire during the night near Government House, the prime minister's compound occupied by the PAD since August. No injuries were reported.

In Chiang Mai, a pro-government gang shot dead an anti-government activist after dragging him from his car.

The long-running unrest has paralysed government decision making, stirring fears it could exacerbate the impact of the global slowdown and tip the export-driven economy into recession.

Tourism, a key sector that lures nearly 15 million visitors a year, is particularly under threat.

At Suvarnabhumi airport, tourists turned up only to find yellow-shirted PAD supporters milling around and few airport officials in sight.

'I'm worried because our visas expired yesterday and I don't want to go into town because we have no money and we might get arrested,' said South African backpacker Deon Bunding, who also had his wallet stolen on the bus from the island of Koh Samui. -- REUTERS