Dec. 3 (Bloomberg) -- The Thai government deposed yesterday is moving to reincarnate itself for the second time in four months. The nation’s courts, royalist elite and thousands of protesters will try to end the new regime just as fast.

The court ruling that dissolved the People Power Party and forced out Prime Minister Somchai Wongsawat was the second in 18 months to disband a party linked to former Prime Minister Thaksin Shinawatra. While anti-government demonstrators said they would end their eight-day occupation of two airports, they reserved the right to resume the protests.

Pro-Thaksin lawmakers are switching to a party created in September called Puea Thai that was activated in anticipation of the court decision. Their opponents, emboldened by the court’s finding of vote-buying, pledge to attack just as fiercely if the new party takes power.

“If Thaksin’s puppet government returns or they make any attempt to amend the constitution in Thaksin’s favor or reduce the king’s power, the People’s Alliance for Democracy will come back,” protest leader Sondhi Limthongkul said yesterday, referring to his protest group.

Sondhi and his followers say they want to change the political system to dilute the influence of the rural voters who form Thaksin’s base. The fight threatens to derail an economy already facing waning demand for the country’s rice, rubber and sugar.

Biggest Rate Cut

Thailand’s central bank today cut its benchmark interest rate by the most on record, saying “domestic political problems are likely to have greater repercussions on economic growth than previously assessed, particularly to confidence and tourism.”

Gross domestic product may not expand next year as the global economic crisis hurts tourism, Finance Minister Suchart Thadathamrongvej said on Dec. 1. Fitch Ratings and Standard & Poor’s Ratings Services both downgraded the nation’s rating outlook to “negative” this week.

Somchai, Thaksin’s 61-year-old brother-in-law, accepted the decision of the Constitutional Court, whose chief judge read the verdicts mere minutes after the closing arguments. Parliament will reconvene to choose a new prime minister, likely a member of the Puea Thai party, which means “For Thailand.”

The People’s Alliance for Democracy, a group composed mostly of the Bangkok middle class, royalists and civil servants, occupied Government House and paralyzed airports in a 192-day protest campaign. Doctors, lawyers, business executives and retirees said it was their duty to re-educate the country’s rural masses.

Bullying

“A lot of bullying is being used to try to defy the will of the electorate,” said Michael Montesano, visiting research fellow at the Institute of Southeast Asian Studies in Singapore. “What we’re seeing is the birth pangs of a very new Thailand, a Thailand in which systems of status that have been taken for granted for a long time will no longer obtain. Right now unfortunately we’re stuck in this very messy period of transition.”

King Bhumibol Adulyadej, the country’s 80-year-old head of state, plans to give an annual address tomorrow on the eve of his birthday. He has used past such occasions to touch on national issues. In April 2006 he told top judges it was their job to take a more active role in political affairs. The courts nullified an election won by Thaksin’s party two weeks later.

Royal Support

Queen Sirikit presided over the funeral of a protester killed in clashes with police on Oct. 7 and said she would pay the medical expenses of injured demonstrators. Many have worn yellow, the color that symbolizes the king, during the six-month protests. Sondhi says they are fighting to prevent Thaksin and his allies from turning Thailand into a monarchy-free republic.

Thaksin, 59, sentenced to two years in prison in October for helping his wife buy land from the government while he served as prime minister, said a month ago he could only return to Thailand if the king showed him mercy or a majority wanted him back. He plans to address a pro-government rally through a live video hookup later this month.

A year ago, the People Power Party won the first election since Thaksin was ousted, taking 75 percent of seats in the northeast, the country’s poorest region and home to a third of Thailand’s electorate. Thaksin, a billionaire-turned-politician, won rural votes by slashing health-care costs, handing out low- cost loans and propping up crop prices.

‘Corruption’

“Thaksin’s corruption and cronyism is not in doubt, but the rural electorate has shown it’s willing to tolerate all of that as long as the policy platform appeals to them,” said Thitinan Pongsudhirak, director of the Institute for Strategic and International Studies at Chulalongkorn University in Bangkok.

Sondhi, 61, said the protesters would hit the streets again if anyone except opposition leader Abhisit Vejjajiva, 44, took power. The opposition Democrat party, which supported the protests and had one of its members as a key leader, won only four of 135 seats in the northeast during the last election while taking 27 of 36 seats in Bangkok.

The ruling party says the constitution, written by the military after a 2006 coup, makes it too easy to dissolve political parties. Appointed bodies such as the Election Commission could find any party guilty of vote buying and the courts could then dissolve them, said Chaturon Chaisang, one of 220 politicians banned by Thai courts over the past two years.

The Puea Thai may struggle to recruit new leaders as it becomes harder to find new talent with each dissolution. Even so, public anger at the airport seizures and other aggressive moves by the protesters may lead to a victory for Puea Thai if a new election is called as Thaksin’s rural support remains.

“The PAD has used harsh measures to destroy the other side, but at the same time it may backfire and they may become less popular,” Chaturon said. “So this fight will not end easily.”

To contact the reporters on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net

Last Updated: December 3, 2008 05:24 EST