By Amy Sawitta Lefevre
BANGKOK (Reuters) - Thailand's acting prime minister was meeting senators on Monday to search for a way out of a protracted political crisis, as anti-government protesters step up pressure to remove him and install a new administration.
Thailand is stuck in political limbo following the dismissal of Prime Minister Yingluck Shinawatra and nine of her ministers on May 7 after a court found them guilty of abuse of power.
Commerce Minister Niwatthamrong Boonsongphaisan replaced, her but the anti-government protesters say he has no legal standing and want all remaining ministers to step down so a new government can be appointed to push through reforms.
As six months of protests reach a crescendo, Bangkok is now the scene of a tense stand-off between government supporters loyal to Yingluck and her brother, ousted former Prime Minister Thaksin Shinawatra, and opposition demonstrators drawn from Bangkok's middle class and royalist establishment.
Thailand has not had a functioning lower house since Yingluck dissolved parliament in December.
The upper house Senate, the country's only remaining legislative body, says it could select an interim prime minister but its leader wants to consult the government first.
That has incensed protest leader Suthep Thaugsuban, who wants the caretaker government removed right away.
"We will take democratic power and hand it back to the people," Suthep told supporters in a speech late on Sunday.
"From Monday we will chase the remnants of the Thaksin regime out. Ministers, resign! You are stunting Thailand's progress," said Suthep, who has promised to surrender to the authorities on May 27 if this final push does not succeed.
The uncertainty has damaged the economy, which shrank by 2.1 percent in January-March from the final quarter of 2013, according to data on Monday from the state planning agency. It cut its forecast for 2014 growth to between 1.5 and 2.5 percent, from a range of 3.0 to 4.0 percent.
It noted that public investment was 19.3 percent lower than a year before as the caretaker government has no authority to begin new projects, while private sector investment fell 7.3 percent as business confidence slumped.
The government and its supporters view a new general election as the best way to solve the crisis - the ruling Puea Thai Party would be well placed to win - but a vote tentatively scheduled for July 20 now looks to be off the table.
A February 2 election was disrupted by Suthep's supporters and then declared void by the Constitutional Court. The protesters say they will disrupt any new vote that takes place before changes to the electoral system are pushed through.
Thaksin was ousted by the army in a 2006 coup and convicted of abuse of power in 2008. He now lives in self-imposed exile. His enemies accuse him of being a corrupt crony capitalist whose legacy has poisoned the country's governance.
Thousands of pro-Thaksin "red shirts" have been camped out in Bangkok's western outskirts to oppose any efforts to install an unelected prime minister.
Fuelling their anger, Monday marks the fourth anniversary of a deadly crackdown on red shirt protesters by a government in which Suthep was a deputy prime minister.
In 2010, red shirts demonstrated for weeks demanding that then Prime Minister Abhisit Vejjajiva call a fresh election. More than 90 people, mostly protesters, were killed in clashes with security forces across Bangkok.
Both Abhisit and Suthep face murder charges for their role in ordering the military to end the protests.
"We will safeguard the people's power until our last breath," said red shirt leader Jatuporn Prompan in a fiery speech to supporters on Monday, asking them to "pull together" for a big rally on Saturday.
The army has tried to stay out of the fight this time, but
in a rare televised announcement last week the army chief said it would have no choice but to use "full force" if government supporters and opponents clashed.
The political divisions are poisoning every aspect of society in Thailand.
Thailand's newly crowned candidate for the Miss Universe pageant, 22-year-old Weluree Ditsayabut, has outraged the red shirts after disparaging remarks she posted about them on her Facebook. "I am so angry at these evil activists. They should all be executed," read one comment.
(Editing by Alan Raybould and Alex Richardson)