By Mohammed Ghobari
SANAA (Reuters) - Tens of thousands of Yemenis demonstrated in the capital Sanaa on Friday in a protest called for by the Shi'ite Houthi movement, which wants the government to resign and reverse a decision on cutting fuel subsidies.
Earlier this week, the Houthis mobilized tens of thousands of supporters in Sanaa and warned they would resort to "legitimate pressure tactics" if authorities did not comply with their demands by Friday.
The Houthis have fought the government repeatedly since 2004 seeking more power for the Zaydi Sh'ite Muslim sect in north Yemen. They have been trying to tighten their grip on northern regions as the majority Sunni country moves toward a federal system that devolves more power to regions.
The unrest is another challenge to President Abd-Rabbu Mansour Hadi, who has struggled to restore stability to the U.S.-allied country next to major oil exporter Saudi Arabia and which is home to one of al Qaeda's most active wings.
On Friday, the demonstrators gathered in a main street that leads to the airport, chanting "the people want the fall of the government" as well as slogans against cutting fuel subsidies.
Some protest organizers said they would set up tents near the interior and telecommunications ministries in a street that leads to Sanaa's airport until their demands are met.
Representatives from the Houthis and the government had met on Thursday to try to reach an agreement to defuse tensions.
"The disagreement focused on ... the Houthis' demand to set up a political party and join a new government (but) leaving out the issue of reversing a decision on fuel subsidies. The Houthis rejected that," a source in the government committee told Reuters on Thursday. He said talks would continue on Friday.
Hadi has promised a more inclusive government after a new constitution is passed later this year.
Western and Gulf sponsors of democratization in Yemen are keen to engage the Houthis because they have made big gains in popular support across north Yemen since the 2011 uprising and are able to bring large numbers of people onto the streets.
But, alarmed by the rise in unrest, the Group of 10 ambassadors, an informal body of Western and Gulf countries and international bodies involved in supporting political reform in Yemen, wrote to the Houthi leadership, voicing concern at recent statements it described as antagonistic and militaristic.
The Gulf Cooperation Council, which brokered a deal that eased former President Ali Abdullah Saleh from power, said it rejected any attempts "aimed at undermining the political process in Yemen" and condemned the "unfortunate events taking place in Sanaa and the threat of using escalating measures".
Yemenis are unhappy about the government's decision to raise fuel prices in late July to cut energy subsidies to ease the burden on its budget deficit. The government spent about $3 billion on subsidies last year, nearly a third of state revenue.
A previous attempt by the government to cut subsidies in 2005 led to unrest that left some 20 people dead and over 200 wounded. The reform was canceled.
(Writing by Yara Bayoumy)