By Amy Sawitta Lefevre
BANGKOK, March 13 (Reuters) - Thailand's National Anti-Corruption Commission (NACC) on Thursday gave Prime Minister Yingluck Shinawatra more time to defend herself against charges of negligence over a ruinous rice subsidy scheme, allegations that could bring her down.
Yingluck, weakened by four months of street protests, has been given until March 29 to defend herself, pushed back from Friday, March 14.
Thailand's long-running political crisis broadly pits Bangkok's middle class and elite plus some southerners against the mostly rural backers of Yingluck and her brother, ousted former premier Thaksin Shinawatra, from the north and northeast.
Thaksin lives overseas to avoid a two-year jail term handed down for graft but is seen as the power behind Yingluck.
The focus of opposition has switched to the courts from the streets, where the number of protesters has dwindled.
National Security Council chief Paradorn Pattanathabutr said a state of emergency in Bangkok and surrounding provinces could be lifted soon because the "overall security situation has improved", which would come as relief to retailers and the tourism sector, hard hit by the sometimes violent protests.
"We're lifting the state of emergency after pleas from the business community that we do so to restore confidence," Paradorn told Reuters, adding that the decision was waiting for final approval from Yingluck.
An Internal Security Act could be invoked in its place, which would still allow the authorities to impose curfews, operate checkpoints and restrict the movements of protesters.
Despite the easing in tension and the NACC extension, some analysts say the odds are still stacked against Yingluck.
"Both sides know Yingluck's days are numbered. This is posturing on both sides. Her enemies want to be seen as giving her more time but this month or next the NACC will rule against her," Paul Chambers, director of research at the Institute of South East Asian Affairs in Chiang Mai, told Reuters.
"That will make her, and ultimately her government, resign, paving the way for a so-called neutral government."
The protesters want to install an unelected "People's Council" that would oversee wide-ranging political reforms, some aimed at curbing her family's influence.
"SOMEONE ELSE'S WAR"
The rice charges are the strongest challenge yet to her leadership and Yingluck could face impeachment by the Senate or criminal charges if the commission finds against her.
The rice scheme, one of her flagship policies, offered above-market prices for the grain but ran into funding problems, leaving hundreds of thousands of farmers unpaid.
Following a disrupted election last month, Yingluck heads a caretaker government with little authority to borrow money to fund the scheme and it has struggled to sell the rice.
However, on Thursday it said it had sold 730,000 tonnes from state warehouses to exporters, which will go towards paying farmers, normally Yingluck's support base.
As the protests have dragged on, consumer and business confidence has taken a beating. Travel agents complain of cancelled bookings and retailers of falling sales.
The central bank cut its policy rate by 25 basis points to 2.0 percent on Wednesday to support the economy.
Some questioned whether that was wise, since it would do little to help domestic demand, given the political problems.
"Its policy credibility may be put to question if markets judge that it is fighting someone else's war," DBS Bank in Singapore said in a note.
Adding to the uncertainty, Thaksin's supporters have threatened to act to defend Yingluck if she is removed from office, adding to fears of civil strife.
Pro-Thaksin "red shirts" say they will rally at the weekend in Ayutthaya province, 80 km (50 miles) north of Bangkok.
"People in the north and northeast of Thailand won't stand for it if Yingluck is removed by the courts or by any other means. We will show them not to mess with us," Thanawut Wichaidit, a spokesman for the "red shirts", told Reuters.
"People who voted her in want to be treated with equality ... We will not let our foes stamp out democracy." (Additional reporting by Apornrath Phoonphongphiphat and Pracha Hariraksapitak; Editing by Alan Raybould and Jeremy laurence)