April 11 (Bloomberg) -- Islamic terrorists linked to al- Qaeda pulled off the first major attack in Algeria's capital since the 1990s civil war, as two bombs killed at least 23 people.

One car bomb exploded next to the Algerian prime minister's office in the center of Algiers while another bomb targeted a police station in the suburbs, escalating a struggle between the secular government and Islamic militants that re-ignited last year. More than 162 were wounded, the state-run Algerie Presse Service said.

The attacks come before Algeria's May 17 parliamentary elections, and after a week of running gun battles in coastal mountains between security forces and the GSPC, or Salafist Group for Preaching and Combat, Algeria's largest remaining Islamic guerrilla group which is closely allied to al-Qaeda.

``This is a major escalation,'' said Steven Cook, a fellow at the Council on Foreign Relations in New York who has just written a book about military governments in Muslim countries, including Algeria. ``We are experiencing the merging of the GSPC into al-Qaeda and this is a sign they feel confident enough to pull off such a major attack.''

Al-Jazeera television said a man identifying himself as Abu Muhammad Salah called the station's Rabat bureau to say he's al- Qaeda's spokesman in North Africa and that the group carried out the attacks.

Al-Qaeda Alliance

The Algerian prime minister's office is an imposing modern white office building on a hillside in the center of the port city. The GSPC stepped up its activities against the Algerian government last year after announcing its alliance with al-Qaeda, though its actions were limited to attacks on police stations or oil installations outside the well-protected capital, home to 2 million of the country's 33 million people.

The explosion at 10:50 a.m. Algiers time was heard kilometers away and a dozen ambulances headed to the scene. The car exploded 100 meters from the entrance to the prime minister's office, according to witnesses. At least 12 people were killed at the government palace and another 118 were wounded, both government workers and passers-by, the official news service said, citing civil defense reports.

The police station of Bab Ezzouar, east of Algiers, was the target of the other bombing in which at least 11 people were killed and 44 wounded, it said.

`Criminal Attack'

Prime Minister Abdelaziz Belkhadem emerged from his office to speak to television cameras about an hour after the attack. ``This criminal attack is perpetrated at the time when the Algerian people are seeking national reconciliation,'' he said.

Both attacks were carried out by suicide bombers and their photos were later published on an al-Qaeda linked Internet site, Agence France Presse reported.

State-run radio stations appealed for blood donations to help the wounded.

The GSPC was founded in the mid-1990s as a rival to the Armed Islamic Groups, or GIA, Algeria's main Islamic guerrilla group. The civil war began after the military-backed government banned 1992 elections that the now banned Islamic Salvation Front was poised to win. While both groups want to impose an Islamic state, the GSPC objected to the GIA slaughter of civilians during the conflict that killed an estimated 200,000 people in the 1990s.

Unlike the GIA, the GSPC didn't accept a 1999 amnesty offer that largely brought the civil war to an end. After virtually disappearing in the mid-1990s, foreign direct investment hit $1.1 billion a year in 2001, 2002 and 2005, the most recent year available, the United Nations Conference on Trade and Development says.

Foreign Investment

The stock of foreign direct investment rose to $8.3 billion in 2005 from $3.1 billion in 1999, UNCTAD says.

In 2003, the GSPC pledged allegiance to al-Qaeda. Ayman al- Zawahiri, the top aide to al-Qaeda leader Osama bin Laden, reciprocated last September, announcing a ``blessed union'' and saying the GSPC would be al-Qaeda's weapon to attack France and Algeria's military-dominated government, which cooperates closely with both France and the U.S.

The GSPC started a wave of attacks on security forces and foreign oil workers last autumn.

The purpose of today's ``bombing was to showcase the capabilities of the new regional alliance of jihadists,'' risk advisory company Stratfor said today in a note to clients. ``That the GSPC is the largest component group within the militant Islamist coalition indicates that Algeria will continue to be the main theater of operations of the al-Qaeda Organization in the Islamic Maghreb. Attacks can be expected in neighboring Tunisia and in Morocco as well.''

More Curbs

Stratfor said today's attacks could be used by the government of Algerian President Abdelaziz Bouteflika to further restrict even non-violent Islamic candidates from running in the May 17 elections.

The Algiers attacks follow the deaths of four suspected terrorists and a policeman yesterday in police raids in neighboring Morocco. Tunisian police and Islamic militants fought gun battles around Tunis last December

Jean-Louis Bruguiere, France's leading anti-terrorist magistrate, has said Muslim terrorist groups throughout North Africa are unifying under the banner of al-Qaeda, led by the GSPC. Other French intelligence officials dispute that theory, saying the Moroccan groups are independent. The three North African nations are former French colonies.

The German government, which hold the revolving presidency of the European Union, condemned the attacks.

``The Presidency condemns these attacks, in which many people died and far more than 100 were injured, in the clearest terms,'' the German Foreign Ministry said in a statement.

To contact the reporter on this story: Gregory Viscusi in Paris at gviscusi@bloomberg.net

Last Updated: April 11, 2007 12:23 EDT