Suicide bombers attack U.S. base in Afghanistan

JALALABAD, Afghanistan (Reuters) - Suicide attackers detonated bombs and fired rockets outside a major U.S. base in Afghanistan on Sunday, killing five people in a brazen operation that highlighted the country's security challenges ahead of the 2014 NATO combat troop pullout.

Local police officials said bodies in Afghan police and military uniforms were scattered around the entrance of the airfield in the eastern city of Jalalabad after a two-hour battle. A Taliban spokesman said the militant group had launched the 6 a.m. assault.

The Taliban, who have been fighting U.S.-led NATO and Afghan forces for more than a decade, sometimes dress in uniforms for attacks.

Two suicide bombers died after blowing themselves up in cars, said Nasir Ahmad Safi, a spokesman for the provincial government.

Seven other bombers were killed in the a gunbattle with Afghan and coalition forces. Three Afghan soldiers and two civilians also died, said Safi.

U.S. helicopters circled overhead.

"There were multiple suicide bombers involved," said Major Martyn Crighton, a spokesman for the NATO-led International Security Assistance Force (ISAF).

Several coalition troops were wounded, he said.

The United States and Afghan government are scrambling to stabilize Afghanistan before most NATO combat troops withdraw at the end of 2014 and hand over security to Afghan forces.

Some Afghans doubt government security forces will be able to defend the country against any Taliban attempts to seize power again after foreign troops withdraw. There are also growing fears that a civil war will erupt.

President Hamid Karzai's government say Afghan security forces have made good progress.

Afghanistan's defense ministry spokesman said there were rocket attacks at the Jalalabad base followed by suicide bombings.

In a text message, Taliban spokesman Zabihullah Mujahid said : "This morning at 6 a.m. a number of our devotees attacked the major U.S. Base in Jalalabad city and so far have brought heavy casualties to the enemy."

In February, a suicide car bomber killed nine people at the base, almost exclusively used by NATO and the U.S. military.

(Additional reporting by Martin Petty in KABUL; Writing by Michael Georgy; Editing by Ron Popeski)

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North Korea plans new rocket launch as leader asserts power

SEOUL (Reuters) - North Korea said it would carry out its second rocket launch of 2012 as its youthful leader Kim Jong-un flexes his muscles a year after his father's death, in a move that South Korea and the United States swiftly condemned as a provocation.

North Korea's state news agency announced the decision to launch another space satellite on Saturday, just a day after Kim met a senior delegation from China's Communist Party in the North Korean capital of Pyongyang.

China, under new leadership, is North Korea's only major political backer and has continually urged peace on the Korean peninsula, where the North and South remain technically at war after an armistice, rather than a peace treaty, ended the 1950-53 conflict.

China's Foreign Ministry said it was deeply concerned by the move, but urged calm.

"North Korea has a right to the peaceful use of space, but this right has been restricted by U.N. Security Council resolutions. (China) hopes all sides can do more to benefit peace and stability on the peninsula, and hopes all sides handle it calmly to avoid the situation escalating," ministry spokesman Qin Gang said in a statement.

In Washington, U.S. State Department spokeswoman Victoria Nuland condemned the launch plan as a provocative threat to the Asia-Pacific region that would violate United Nations resolutions imposed on Pyongyang after past missile tests.

"A North Korean 'satellite' launch would be a highly provocative act that threatens peace and security in the region," she said in a written statement.

North Korea has notified its neighbors of the proposed flight path, an unnamed South Korean official told Yonhap news agency on Sunday, saying that it would take a similar path to a failed rocket launch in April this year.

That was supposed to take the rocket over seas separating China and the Korean peninsula where the first stage of the rocket would drop into the sea, then to pass over Okinawa. The second stage was to fall in seas off the Philippines.

Pentagon spokesman George Little said, "North Korea must abide by its international obligations under U.N. Security Council resolutions that clearly articulate what it can and cannot do with respect to missile technologies."

Seoul's foreign ministry called the move a "grave provocation." Japan's Kyodo news agency said Prime Minister Yoshihiko Noda had ordered ministries to be on alert for the launch.

"North Korea wants to tell China that it is an independent state by staging the rocket launch and it wants to see if the United States will drop its hostile policies," said Chang Yong-seok, a senior researcher at the Institute for Peace Affairs at Seoul National University.

North Korea is banned from conducting missile or nuclear-related activities under U.N. resolutions imposed after earlier nuclear and missile tests. The country says its rockets are used to put satellites into orbit for peaceful purposes, but that assertion is not widely accepted outside of Pyongyang.

Washington and Seoul believe that the impoverished North is testing long-range missile technology with the aim of developing an intercontinental ballistic missile capable of carrying a nuclear warhead.

Pyongyang's threats are aimed, in part, at winning concessions and aid from Washington, analysts say.

POLITICS AND ANNIVERSARIES

The failed April rocket launch took place to celebrate the 100th anniversary of the birth of North Korea founder Kim Il Sung and the latest test will take place close to the December 17 date of the death of former leader Kim Jong-il.

It will also come as South Korea gears up for a December 19 presidential election in a vote that pits a supporter of closer engagement with Pyongyang against the daughter of South Korean dictator Park Chung-hee.

The April test was condemned by the United Nations, although taking action against the North is hard as China refuses to endorse further sanctions against Pyongyang.

North Korea is already one of the most heavily sanctioned states on earth thanks to its nuclear program.

Pyongyang has few tools to pressure the outside world to take it seriously due to its diplomatic isolation and its puny economy.

The state that Kim Jong-un inherited last December after the death of his father boasts a 1.2 million-member military, but its population of 23 million, many malnourished, supports an economy worth just $40 billion annually in purchasing power parity terms, according to the U.S. Central Intelligence Agency.

"The North's calculation may be that they have little to lose by going ahead with it at this point," said Baek Seung-joo of the Korea Institute for Defense Analyses in Seoul.

Baek said the test planned for December would likely be no more successful in launching a satellite than the April one that crashed into the sea between China and North Korea after flying just 120 km (75 miles).

"Kim Jong-un may be taking a big gamble trying to come back from the humiliating failure in April and in the process trying to raise the morale for the military," Baek said.

North Korea's space agency said on Saturday that it had worked on "improving the reliability and precision of the satellite and carrier rocket" since April's launch.

(Additional reporting by Jack Kim, Jumin Park and Sung-won Shim in SEOUL, John Ruwitch in SHANGHAI, Ben Blanchard and Niu Shuping in BEIJING and Andrew Quinn, Paul Eckert and David Alexander in WASHINGTON; Editing by Ron Popeski, Doina Chiacu and Daniel Magnowski)

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Islamist protest shuts down Egypt's top court

CAIRO (Reuters) - Protests by Islamists allied to President Mohamed Mursi forced Egypt's highest court to adjourn its work indefinitely on Sunday, intensifying a conflict between some of the country's top judges and the head of state.

The Supreme Constitutional Court said it would not convene until its judges could operate without "psychological and material pressure", saying protesters had stopped the judges from reaching the building.

Several hundred Mursi supporters had protested outside the court through the night ahead of a session expected to examine the legality of parliament's upper house and the assembly that drafted a new constitution, both of them Islamist-controlled.

The cases have cast a legal shadow over Mursi's efforts to chart a way out of a crisis ignited by a November 22 decree that temporarily expanded his powers and led to nationwide protests.

The court's decision to suspend its activities appeared unlikely to have any immediate impact on Mursi's drive to get the new constitution passed in a national referendum on December 15.

Three people have been killed and hundreds wounded in protests and counter-demonstrations over Mursi's decree.

At least 200,000 of Mursi's supporters attended a rally at Cairo University on Saturday. His opponents are staging an open-ended sit-in in Cairo's Tahrir Square, the cradle of the uprising that toppled Hosni Mubarak in February 2011.

Mursi and the Muslim Brotherhood, which propelled him to power in a June election, hope to end the crisis by pushing through the new constitution hastily adopted by the drafting assembly on Friday. The next day the assembly handed the text to Mursi, who called the referendum and urged Egyptians to vote.

"The Muslim Brotherhood is determined to go ahead with its own plans regardless of everybody else. There is no compromise on the horizon," said Hassan Nafaa, a professor of political science at Cairo University.

Outside the Supreme Constitutional Court, Muslim Brotherhood supporters rallied behind the referendum date. "Yes to the constitution", declared a banner held aloft by one protester. Chants demanded the "purging of the judiciary".

The interior minister told the head of the court that the building was accessible and the protests were peaceful, according a statement from the ministry.

The protest reflected the deep suspicion harbored by Egypt's Islamists towards a court they see as a vestige of the Mubarak era. The same court ruled in June to dissolve the Muslim Brotherhood-led lower house of parliament.

Since then, several legal cases have challenged the legitimacy of the upper house of parliament and the 100-member constituent assembly that wrote the constitution.

Those against the upper house have focused on the legality of the law by which it was elected, while the constitutional assembly has faced a raft of court cases alleging that the way it was picked was illegal.

STOCK MARKET RALLIES

Mursi believes that securing approval for the new constitution in a popular referendum will bury all arguments on the legality of the constituent assembly, as well as controversy over the text it worked through the night to finish on Friday.

It will also override the November 22 decree that prompted statements of concern from Western governments and a rebellion by sections of the judiciary that saw it as a threat to their role. The decree shielded Mursi from judicial oversight.

Judges supervise voting in Egypt, so Mursi now needs them to oversee the referendum. Vice President Mahmoud Mekky said on Sunday he was confident the judges would perform that role, though Mursi's critics in the judiciary may call for a boycott.

While the Islamists' critics, including representatives of the Christian minority, have accused the Brotherhood of trying to hijack the constitution, investors appear to have seen Mursi's moves as a harbinger of stability. They were also relieved that Saturday's mass Islamist protest went off calmly.

The main stock market index, which lost a tenth of its value in response to Mursi's November 22 decree, rallied more than 2 percent when the market opened on Sunday.

"The events that took place through the weekend, from the approval of the final draft of the constitution and the president calling a referendum, gave some confidence to investors that political stability is on track," said Mohamed Radwan of Pharos Securities, an Egyptian brokerage.

But the political opposition, made up of leftist, liberal and socialist parties, have been infuriated by what they see as the Brotherhood's attempt to ram through a constitution that does not enjoy national consensus.

Mursi's opponents warn of deeper polarization ahead.

"LET EVERYONE HAVE THEIR SAY"

Leading opposition figure Mohamed ElBaradei said on Twitter that the "struggle will continue" over a draft constitution that "undermines basic freedoms".

Liberal figures, including former Arab League chief Amr Moussa, pulled out of the constituent assembly last month, as did Christian representatives.

The draft constitution contains Islamist-flavored language which opponents say could be used to whittle away human rights and stifle criticism. It forbids blasphemy and "insults to any person", does not explicitly uphold women's rights and demands respect for "religion, traditions and family values".

The New York-based Human Rights Watch said it protected some rights while undermining others.

The text limits presidents to two four-year terms, requires parliamentary approval for their choice of prime minister, and introduces some civilian oversight of the military - although not enough for critics. Mubarak ruled for three decades.

Mursi described it as a constitution that fulfilled the goals of the January 25, 2011 revolution that ended Mubarak's rule. "Let everyone - those who agree and those who disagree - go to the referendum to have their say," he said.

The Islamists are gambling that they will be able to secure a "yes" vote by mobilizing their core support base and many other Egyptians keen for an end to two years of turmoil that has taken a heavy toll on the economy.

Nafaa of Cairo University said the constitution would likely be approved by a slim majority. "But in this case, how can you run a country with a disputed constitution - a constitution not adopted by consensus?" he asked.

(Writing by Tom Perry; Editing by Alistair Lyon)

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NATO aims to repair Russia ties despite Patriot row

BRUSSELS (Reuters) - NATO foreign ministers, meeting for the first time this week since Russia appointed a new ambassador to the military alliance, are hoping to improve ties with Moscow despite a fresh row over plans to send anti-aircraft missiles to Turkey.

A NATO spokeswoman said the meeting aimed to "re-energize" relations with Russia - whose cooperation is needed both on ending the conflict in Syria and smoothing the withdrawal of most foreign combat troops from Afghanistan by the end of 2014.

The twice-yearly meeting on Tuesday and Wednesday will also discuss funding for Afghanistan forces after 2014, and will be preceded by a visit to NATO headquarters in Brussels by Pakistan Foreign Minister Hina Rabbani Khar.

Russia appointed a new ambassador to NATO in October after a 10-month gap, raising hopes for an improvement in ties, strained by U.S. and NATO plans to construct a missile shield around Europe as well as last year's NATO bombing campaign in Libya.

NATO and Russia have, however, have been at odds over how to end the 20-month revolt in Syria. Russia has vetoed U.N. Security Council resolutions aimed at increasing pressure on Syrian President Bashar al-Assad to step down.

Russian Foreign Minister Sergei Lavrov, who meets NATO ministers including U.S. Secretary of State Hillary Clinton on Tuesday, is expected to raise concerns over plans to deploy Patriot surface-to-air missiles on NATO member Turkey's border with Syria.

"We will tell them (the Russians) ... that this is defensive and not there to establish a no-fly zone," a senior NATO official, speaking on condition of anonymity, said.

The NATO meeting coincides with a visit by Russian President Vladimir Putin to Turkey, where he is expected to face fresh calls to help bring an end to the war in Syria.

AFGHAN WITHDRAWAL

The NATO meeting will also discuss how some $4.1 billion of annual foreign funding for Afghanistan's security forces will be managed after 2014.

The Afghan government wants to handle its own finances but with Western concerns over corruption running high, it is likely NATO will have a strong role in managing international funding, NATO diplomats said.

Afghan Foreign Minister Zalmai Rassoul will join the Afghan part of the talks.

Western domestic pressure is rising to end the Afghan war where fighting shows little sign of easing - on Sunday militants attacked on a U.S.-Afghan airbase in eastern Afghanistan [ID:nL4N09C010].

Pakistan, whose help is seen as needed to reach a political settlement to the war, has begun to release some Taliban prisoners in response to calls from Afghanistan to smooth the way to peace talks.

Meanwhile, little progress is seen at the Brussels talks on the row between NATO and Russia over Washington's plans for the missile shield, due to be completed in four phases by roughly 2020, to counter a potential threat from Iran.

Moscow says the system will undermine its nuclear deterrent by making its missiles vulnerable.

The senior NATO official said it was too early to expect any new initiative. "I think you still need to give it a little time ... On BMD (ballistic missile defense), we will need a new momentum," he said.

(Editing by Myra MacDonald)

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Netanyahu brushes off world condemnation of settlement plans

JERUSALEM (Reuters) - Prime Minister Benjamin Netanyahu on Sunday brushed off world condemnation of Israel's plans to expand Jewish settlements after the Palestinians won de facto U.N. recognition of statehood.

"We will carry on building in Jerusalem and in all the places that are on the map of Israel's strategic interests," a defiant Netanyahu said at the weekly cabinet meeting.

In another blow to the Palestinian Authority (PA) in the West Bank, Israel also announced it was withholding Palestinian tax revenues this month worth about $100 million because of a $200 million PA debt to the Israeli Electric Corporation.

Yasser Abed Rabbo, a senior Palestinian official, said confiscation of the funds due the cash-strapped Authority and vital to meeting its payroll, was "piracy and theft".

Stung by the U.N. General Assembly's upgrading on Thursday of the Palestinians' status from "observer entity" to "non-member state", Israel said on Friday it would build 3,000 more settler homes in the West Bank and East Jerusalem, areas Palestinians want for a future state, along with Gaza.

An Israeli official said the government also ordered "preliminary zoning and planning work" for thousands of housing units in areas including the so-called "E1" zone near Jerusalem.

Such construction could divide the West Bank in two and further dim Palestinian hopes, backed by the United States and other international sponsors of the Middle East peace process, for a contiguous country.

But Israeli officials said it could up to two years before any building begins in E1.

At the cabinet meeting, Netanyahu said the "unilateral step the Palestinians took at the U.N. is a gross violation of previous agreements signed with Israel". The government of Israel, he added, "rejects the General Assembly's vote".

The upgrade, approved overwhelmingly, fell short of full U.N. membership, which only the Security Council can grant. But it has significant legal implications because it could allow the Palestinians access to the International Criminal Court where they could file complaints against Israel.

Israel's settlement plans, widely seen as retaliation for the Palestinians' U.N. bid, have drawn strong international condemnation from the United States, France, Britain and the European Union.

"The recognition of Palestine as a state changes a lot of the facts, and aims to establish new ones," Palestinian President Mahmoud Abbas told a cheering crowd in the West Bank city of Ramallah on his return from the United States.

"But we have to recognize that our victory provoked the powers of settlement, war and occupation."

INTERNATIONAL CRITICISM

Netanyahu heads a pro-settler government and opinion polls predict his Likud party will come out on top in Israel's January 22 parliamentary election, despite opponents' allegations that his policies have deepened Israeli diplomatic isolation.

"All settlement construction is illegal under international law and constitutes an obstacle to peace," the EU's foreign policy chief Catherine Ashton said in a statement on Sunday.

The United States said the plan was counterproductive to any resumption of direct peace talks, stalled for two years in a dispute over settlement expansion in the West Bank and East Jerusalem, both captured by Israel in a 1967 war.

Netanyahu says Israel, as a Jewish state, has a historic claim to land in the West Bank and to all of Jerusalem. Palestinians want East Jerusalem as the capital of a future state. Israel considers all of the holy city as its capital, a claim that is not recognized internationally.

Israeli Housing Minister Ariel Attias said that within weeks the government would publish invitations for bids from contractors to build 1,000 homes in East Jerusalem and more than 1,000 in West Bank settlement blocs.

"E1 is in planning, which means sketches on paper," Attias told Army Radio. "No one will build until it is clear what will be done there."

The E1 zone is considered especially sensitive. Israel froze much of its activities in E1 under pressure from former U.S. President George W. Bush and the area has been under the scrutiny of his successor Barack Obama.

Benny Kashriel, mayor of the Maale Adumim settlement adjacent to E1, told Army Radio building "will take a year or two".

Yariv Oppenheimer, head of the Israeli anti-settlement group Peace Now said: "If we build in E1 the two-state vision will truly be history ... it is a strategic point that if built, will prevent the Palestinians from having a normal state."

Approximately 500,000 Israelis and 2.5 million Palestinians live in the West Bank and East Jerusalem.

(Additional reporting by Jihan Abdalla and Ali Sawafta in Ramallah; Editing by Jeffrey Heller and Andrew Roche)

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North Korea plans second rocket launch in December

SEOUL (Reuters) - North Korea is to carry out its second rocket launch this year in December as South Korea holds its presidential election in a move that will likely trigger diplomatic tensions between the two Koreas and censure from the United States and Japan.

State news agency KCNA said on Saturday that the launch of a rocket carrying a satellite would take place between December 10 and December 22.

North Korea says its launches are for peaceful purposes, although Washington and Seoul believe the isolated, impoverished state is testing long-range missile technology with the aim of developing an intercontinental ballistic missile capable of carrying a nuclear warhead.

North Korea undertook a similar launch in April that was aborted a few minutes into its mission. The North is banned from conducting missile or nuclear-related activities under United Nations resolutions.

The coming launch will take place around the time of South Korea's presidential polls on December 19 and close to the first anniversary of the death of former leader Kim Jong-il.

Kim died on December 17 last year and was succeeded by his son, Kim Jong-un.

(Reporting by David Chance and John Ruwitch; Editing by Ron Popeski)

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Islamists rally behind Mursi as Egypt's rifts widen

CAIRO (Reuters) - Islamist crowds demonstrated in Cairo on Saturday in support of President Mohamed Mursi, who is racing through a constitution to try to defuse opposition fury over his newly expanded powers.

Many thousands assembled outside Cairo University, waving Egyptian flags and green Islamist emblems to show their backing for the president and the constitution he is promoting.

Mursi was expected later in the day to set a date for a referendum on the constitution hastily approved by an Islamist-dominated drafting assembly on Friday after a 19-hour session.

Mohamed Ibrahim, a hardline Salafi Islamist scholar and a member of the constituent assembly, said secular-minded Egyptians had been in a losing battle from the start.

"They will be sure of complete popular defeat today in a mass Egyptian protest that says 'no to the conspiratorial minority, no to destructive directions and yes for stability and sharia (Islamic law)'," he told Reuters.

Demonstrators, many of them bused in from the countryside, held pro-constitution banners. Some read "Islam is coming", "Yes to stability" and "No to corruption".

Tens of thousands of Egyptians had protested against Mursi on Friday and rival demonstrators threw stones after dark in Alexandria and the Nile Delta town of Al-Mahalla Al-Kobra.

"The people want to bring down the regime," they chanted in Cairo's Tahrir Square, echoing the slogan that rang out there less than two years ago and brought down Hosni Mubarak.

Mursi plunged Egypt into a new crisis last week when he gave himself extensive powers and put his decisions beyond judicial challenge, saying this was a temporary measure to speed Egypt's democratic transition until the new constitution is in place.

His assertion of authority in a decree issued on November 22, a day after he won world praise for brokering a Gaza truce between Israel and the Palestinian Islamist Hamas movement, dismayed his opponents and widened divisions among Egypt's 83 million people.

Two people have been killed and hundreds wounded in protests by disparate opposition forces drawn together and re-energized by a decree they see as a dictatorial power grab.

Mursi has alienated many of the judges who must supervise the referendum. His decree nullified the ability of the courts, many of them staffed by Mubarak-era appointees, to strike down his measures, although says he respects judicial independence.

A source at the presidency said Mursi might rely on the minority of judges who support him to supervise the referendum.

Mursi, once a senior Muslim Brotherhood figure, has put his liberal, leftist, Christian and other opponents in a bind. If they boycott the referendum, the constitution would pass anyway.

If they secured a "no" vote to defeat the draft, the president could retain the powers he has unilaterally assumed.

And Egypt's quest to replace the basic law that underpinned Mubarak's 30 years of army-backed one-man rule would also return to square one, creating more uncertainty in a nation in dire economic straits and seeking a $4.8 billion loan from the IMF.

"NO PLACE FOR DICTATORSHIP"

Mursi's well-organized Muslim Brotherhood and its ultra-orthodox Salafi allies, however, are convinced they can win the referendum by mobilizing their own supporters and the millions of Egyptians weary of political turmoil and disruption.

"There is no place for dictatorship," the president said on Thursday while the constituent assembly was still voting on a constitution which Islamists say enshrines Egypt's new freedoms.

Human rights groups have voiced misgivings, especially about articles related to women's rights and freedom of speech.

The text limits the president to two four-year terms, requires him to secure parliamentary approval for his choice of prime minister, and introduces a degree of civilian oversight over the military - though not enough for critics.

The draft constitution also contains vague, Islamist-flavored language that its opponents say could be used to whittle away human rights and stifle criticism.

For example, it forbids blasphemy and "insults to any person", does not explicitly uphold women's rights and demands respect for "religion, traditions and family values".

The draft injects new Islamic references into Egypt's system of government but retains the previous constitution's reference to "the principles of sharia" as the main source of legislation.

"We fundamentally reject the referendum and constituent assembly because the assembly does not represent all sections of society," said Sayed el-Erian, 43, a protester in Tahrir and member of a party set up by opposition figure Mohamed ElBaradei.

Several independent newspapers said they would not publish on Tuesday in protest. One of the papers also said three private satellite channels would halt broadcasts on Wednesday.

Egypt cannot hold a new parliamentary election until a new constitution is passed. The country has been without an elected legislature since a court ordered the dissolution of the Islamist-dominated lower house in June.

(Additional reporting by Marwa Awad; Editing by Louise Ireland)

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Palestinian dies after Israeli troops fire at Gaza border: medics

GAZA (Reuters) - One of six Palestinians shot and wounded by Israeli troops on Friday while protesting at the Gaza Strip boundary fence died on Saturday, hospital officials said.

The fortified fence and a 300-metre-deep zone on the Palestinian side - on which Israel has regularly fired since 2009 with the declared aim of keeping gunmen and infiltrators away from the border - have been a testing ground for the November 21 truce that ended an eight-day surge in Gaza fighting.

Gaza's Hamas government has said the Egyptian-brokered ceasefire would put an end to the Israeli no-go zone, allowing Palestinian farmers back to their land there. Israel has said it would back off if Palestinians did not threaten to strike across the boundary.

Asked about Friday's shootings near the southern town of Rafah, an Israeli military spokeswoman said Palestinians had come up to the fence to vandalize it. Soldiers warned them away, and when that did not deter them, shot at their legs, she said.

Palestinians described the incident as a demonstration, saying that six people were wounded by the Israeli gunfire. One of them, a 21-year-old man, died on Saturday, hospital officials in Gaza said.

Islamist Hamas remains hostile to the Jewish state but has on at least one occasion sent police to evacuate such protests since the ceasefire, saying it sought both to shore up the truce and prevent Palestinian casualties.

(Writing by Dan Williams and Nidal al-Mughrabi; Editing by Pravin Char)

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Syrian jets bomb rebels, Internet down for third day

BEIRUT (Reuters) - Syrian jets bombed rebel-held areas of Damascus on Saturday, residents said, and a countrywide Internet blackout entered its third day.

Syrian rebels fighting to oust President Bashar al-Assad clashed with troops in most populated areas of the country, according to opposition activists. At least 40,000 people have been killed during the 20-month-old uprising, they say.

The Syrian Observatory for Human Rights, an opposition-linked monitor, said war planes were bombing the Damascus suburbs of Kafar Souseh and Darraya.

If rebels maintain a presence in these areas, they will hold ground in a continuous arc from the northeast to southwest of the capital's outer districts.

"Syrian regular forces are trying to control the areas surrounding the capital and clashed with rebel fighters," the Observatory said.

The mostly Sunni Muslim rebels battling Assad, who is from Syria's Alawite minority linked to Shi'ite Islam, have been making gains across Syria by overrunning military bases and have been ramping up attacks on Damascus, his seat of power.

Since Thursday, clashes have been reported near the Aqraba and Babilla districts on the southeastern outskirts of Damascus which lead to the international airport, effectively closing the road and leading EgyptAir and Emirates to suspend flights.

Syrian state television quoted a ministry of information statement saying the Damascus international airport was open on Saturday and that the road leading to it was safe. Opposition activists said clashes continued.

Networking experts accuse the government of cutting off the Internet but Damascus blames "terrorists," a term it uses for the opposition.

Rights groups have warned the communications drop off is a precursor to a wider offensive by government forces in the capital. Syrian security sources and diplomats say the government intends to block central Damascus from the restive suburbs.

Rebels and activists said on Saturday there have been multiple communications problems since the uprising began.

Abu Yazen, an activist from the central city of Homs, said rebel units had been using satellite phones, radios and Skype to coordinate with each other.

"There is no Internet or phone service in Syria but it has not affected our work too much," he told Reuters over Skype.

Activists reported clashes and aerial strikes in the provinces of Homs, Deir al-Zor, Idlib and in Aleppo where they said 14 rebels fighters were killed during an assault on an army base in the town of Khanasser early on Saturday.

(Reporting by Oliver Holmes; Editing by Janet Lawrence)

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Mexico's Pena Nieto takes power, begins new era for old ruling party

MEXICO CITY (Reuters) - Enrique Pena Nieto took over as Mexican president on Saturday, offering a shot at redemption for the party that shaped modern Mexico if he can bring about an end to years of violence and economic underperformance.

Returning the centrist Institutional Revolutionary Party, or PRI, to power after a 12-year hiatus, the 46-year-old Pena Nieto aims to use a recent improvement in the economy's fortunes to spark faster growth.

Shortly after midnight at the national palace, outgoing President Felipe Calderon formally transferred power to his successor, handing over a red, white and green national flag to Pena Nieto and saluting him.

"Today I begin to exercise the honorable office of president," said Pena Nieto, who then swore in his top security ministers.

Pockets of protesters from leftist groups skirmished with police in riot gear in the capital hours later, some throwing Molotov cocktails at barriers near Congress in a bid to disrupt a swearing-in ceremony and inaugural address due later on Saturday morning.

Former State of Mexico governor Pena Nieto won the July 1 election with about 38 percent of the vote, more than 6 points ahead of second-placed leftist rival Andres Manuel Lopez Obrador.

Telegenic and married to a popular actress, Pena Nieto promises to restore calm after more than 60,000 people were killed in violence between drug gangs and security forces during the six-year term of his conservative predecessor.

"Unfortunately, this has been something which has made or formed the image of Mexico in the world," Pena Nieto said during a trip to Europe in October. "That's why there's no doubt dealing with lawlessness more effectively is a priority."

He says he is committed to the fight against organized crime, which dominated Calderon's presidency, but has also stressed his main goal is to reduce the violence.

The new president's right-hand man, Luis Videgaray, and close political ally Miguel Angel Osorio Chong will be the two key figures in his cabinet, running the finance and interior ministries respectively.

Having helped shepherd a labor reform through Congress since his election victory, Pena Nieto now wants to pass legislation to strengthen Mexico's tax base and allow more private investment in lumbering state oil giant Pemex.

If he is successful, the reforms could help spur stronger growth and create jobs, blunting the allure of organized crime.

Like many of Mexico's best-known institutions, Pemex was a creation of the PRI, which ruled for 71 uninterrupted years until it was voted out in 2000. By then, the party had become a byword for corruption, cronyism and vote-rigging.

'ESTABLISHMENT GUY'

Annual economic growth averaged less than 2 percent under the National Action Party, or PAN, over the past 12 years. That record and growing worries over the drug war violence opened the door for a PRI comeback under Pena Nieto.

Still, inflation has been kept in check, debt levels are low and growth picked up toward the end of Calderon's term, with the economy outperforming Brazil's in the past two years.

"Maintaining that stability is going to be one of the biggest challenges of the next government," said Phillip Hendrix, 44, a Mexican businessman.

Pena Nieto's inner circle features several ambitious young economists and financial experts eager to prove the PRI can do a better job of managing Latin America's second-biggest economy.

For much of the PRI's reign, Mexico enjoyed stronger growth than the PAN mustered, but memories of default on the country's debts in 1982 and a financial crash in 1994 and 1995 still linger.

"It's very hard to believe in the PRI. They bankrupted Mexico," said construction worker Jose Luis Mendoza.

Supporting a family of four on 1,300 pesos ($100) a week, Mendoza, 29, said he was worse off now than when Calderon took office, and doubted his life would improve under Pena Nieto. "The cost of everything has gone up - but my wage hasn't," he said.

Pena Nieto has pledged to put more money in Mexicans' pockets and shake up competition in a country where large swaths of the economy are concentrated in the hands of a few, like telecom billionaire Carlos Slim, the world's richest man.

But Pena Nieto has been vague so far about how he plans to create a more level playing field, and pollster Jorge Buendia said it would be foolish to expect radical change.

"Pena Nieto's not a reformist guy. He never has been," Buendia said. "He's an establishment guy and I don't think he's going to rock the establishment that much."

($1 = 12.95 Mexican pesos)

(Additional reporting by David Alire Garcia; Editing by Kieran Murray, Simon Gardner and Sandra Maler)

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