The People's Alliance for Democracy (PAD) has called off the Monday rally at police headquarters - so leaders can attend the cremation ceremonies for two supporters killed during clashes with authorites last Tuesday. Prime Minister Somchai Wongsawat pleaded for calm.
Chamlong Srimuang, a PAD core leader, said on Sunday night that a new date will be set for the anti-police demonstration.
Mr Somchai said he would gladly resign - but there was no sign that resignation would calm the political climate.
For one day at least, the decision to call off a mass rally near Siam Square against the police calmed fears of another bloody clash.
Police had called in reinforcements and had 1,350 officers guarding their headquarters. They sealed off the two entrances on Henri Dunant and Rama I roads. PAD supporters and pro-government supporters from the provinces were also heading for Bangkok for the confrontation.
The PAD's rival, the United Front for Democracy Against Dictatorship (UDD), was stationed at Sanam Luang on Sunday where their security guards underwent training.
A short while before the PAD announcement, Prime Minister Somchai Wongsawat made a 10-minute nationwide announcement on television calling on anti-government demonstrators to end their protests, give up their occupation of Government House and clear the streets and allow his government to fully function.
PAD leader Sondhi Limthongkul told demonstrators the planned rally would be postponed for a few days until the completion of the funeral rites for Angkhana Radappanyawut and Pol Lt-Col Methee Chartmontri.
Angkhana, 28, who died while being taken from the site of the clash at the Royal Plaza to Ramathibodi hospital, will be cremated at Wat Sri Prawat in Bang Kruai district in Nonthaburi on Monday. Pol Lt-Col Methee's cremation ceremony is set for Tuesday.
"We just learned about Angkhana and Methee's cremations and we don't want the rally [at police headquarters] to overshadow these very important events. We want the ceremonies to be the grandest," Mr Sondhi said.
"We want today (Monday) and tomorrow to be the biggest days for our late heroine and hero. Their funerals are far more important than the massive rally at police headquarters," he added.
All the PAD leaders will attend Angkhana's cremation ceremony, where a large number of PAD supporters are also expected.
Mr Somchai said in his address to the country that the government needed to work out plans to cope with the looming global economic crises that originated in the United States but would inevitably expand to Asia.
Business sectors would feel the "appalling" impact of the economic downturn and the country needed to be prepared, he said.
The government must also stay in office to perform many important functions, including the funeral of Her Royal Highness Princess Galyani Vadhana next month, the birthday celebrations for His Majesty the King in December that traditionally uses Government House as a venue, and the summit of the Association of Southeast Asian Nations (Asean), also in December.
Thailand is chairing the 10-member group. Thai people need to show unity among themselves, pay respect to the royal institution and show the country's readiness to host the Asean summit, he added.
In response to calls for his resignation, Mr Somchai said he would neither resign nor dissolve the House unless those options would lead to a political solution.
He also expressed sorrow for the fatal crackdown on demonstrators last Tuesday and said some demonstrations breached the law and his elected government had to be answerable to the public and enforce the law.
The government already formed two committees. One panel will quickly find out the facts surrounding the Oct 7 incident and the other committee will work out ways to compensate affected people and damaged properties, including those affected and damaged before last Tuesday's unrest.
He said Deputy Prime Minister Chavarat Charnveerakul had been appointed to chair the committee to rehabilitate the victims, and Preecha Panitchwong, a former Supreme Administrative Court judge, was selected to be the chairman to probe the violent crackdown last Tuesday.
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