Timor president appeals for loyalty, national unity

DILI, June 1 (Reuters) East Timor's President Xanana Gusmao took to Dili's troubled streets today, pleading with the country's feuding security forces to show national unity as foreign peacekeepers appeared to take control.

Isolated clashes between the gangs -- the product of East Timor's desperately poor economy and massive unemployment -- were reported overnight, but the city appeared mostly calm today.

Gusmao, who on Tuesday assumed emergency powers and sole responsibility for security, went on a tour of the city, visiting the police headquarters where he urged a group of around 50 officers to end the violence.

''This is a time when the country needs unity, not fighting,'' said Gusmao, accompanied by a small contingent of Timorese bodyguards as well as some Australian troops.

Rival gangs loosely allied to the armed forces went on a rampage of looting and arson last week after the government ordered feuding soldiers and police out of Dili, leaving the capital of the world's youngest independent state without security.

The violence has deepened differences between Gusmao, a hero of East Timor's independence struggle, and Prime Minister Mari Alkatiri, whose sacking of 600 soldiers last month triggered the crisis.

Foreign Minister Jose Ramos-Horta, a winner of the Nobel Peace Prize, says the country has been badly let down by its government.

A 2,500-strong Australian-led international peacekeeping force is now on the ground in East Timor with the aim of disarming all police and soldiers, and taking full responsibility for security.

Force commander Brigadier Mick Slater says the majority of the army had surrendered their weapons, but that the police -- seven of whom were gunned down by soldiers last week -- were proving more reluctant.

Foreign troops were also with Major Alfredo Reinado, leader of the rebellious soldiers, east of the capital. He says the crisis would not end until Alkatiri resigned.

''The prime minister must go,'' he told the Australian Broadcasting Corporation. ''He is responsible for this mess.'' The soldiers were dismissed for mutiny after they went public with allegations of discrimination against Lorosae (eastern) troops by officers from Loromonu (the west).

The split is said to mirror the divide in the country leading up to the bloody independence referendum of 1999 when Timorese voted overwhelmingly for independence from Indonesia, which annexed the country after colonial masters Portugal withdrew in 1975.

Gusmao's tour of Dili was met by enthusiasm by residents who chased after his convoy as it went through the potholed streets of the ramshackle capital.

''Last night was OK. I think I will try to go home today,'' said Maria Vasquez, camped out in the grounds of a church near one of the more troubled neighbourhoods today.

But a few blocks away, youths had set fire to a house belonging to a rival just minutes after an Australian patrol passed by.

Apart from some coffee, East Timor has virtually no economy but potentially billions in oil and gas deposits in waters currently under dispute with Australia.

Analysts say the government needs to spend millions it has received in exploration fees on infrastructure projects to create jobs for the one-million strong population -- over half of whom are unemployed.

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