Abhisit said he had ended 12 days of emergency rule both to foster reconciliation with supporters of ousted former leader Thaksin Shinawatra and also to show the world that the troubled kingdom was back to normal.
"We will send a signal to the international community that normalcy has been restored," Abhisit said at his offices in Bangkok´s Government House, which were at the epicenter of the protests by the pro-Thaksin "Red Shirts".
He declared an emergency in the capital and five surrounding provinces on April 12, a day after demonstrators forced the cancellation of a summit of Asian leaders in the coastal city of Pattaya.
Two people were killed and 123 injured as protesters later fought running battles with troops across Bangkok for two days, before finally dispersing on April 14 in the face of a threatened military crackdown.
Tensions also rose a week ago after an assassination attempt in Bangkok on the founder of the anti-Thaksin "Yellow Shirts" movement, Sondhi Limthongkul, who led a crippling blockade of the capital´s airports last year.
Terrestrial television channels all interrupted normal programming at midday (0500 GMT) to show an official announcement of the end of the state of emergency.
Abhisit said he was confident the international community would accept that it was "crucial to maintain troops" in areas where there was still public concern and where police were overstretched.
"Foreigners will understand as they closely monitor the rallies," he said.
Thailand´s image as a "Land of Smiles" for tourists has taken a major hit from the recent disturbances, including the airport blockade, which left hundreds of thousands of passengers stranded.
Businesses had also pressed the government to lift the emergency, with state-controlled Thai Airways suffering a 20 percent drop in bookings -- mainly from Asian countries -- since it was imposed, the Nation newspaper reported.
During a parliamentary debate overnight, Abhisit had said he would lift the emergency as part of wider efforts to end the years of political turmoil since Thaksin was ousted in a military coup in 2006.
The Red Shirts want Abhisit to quit and call elections, saying that the Democrat Party leader came to power unfairly in December after a court toppled Thaksin´s allies from power.
"Lifting the state of emergency is part of measures to find a solution for the country. The government wants to show its sincerity, that the government wants reconciliation and to make the country move forwards," he said.
But Abhisit faces a major challenge to heal the deep rifts in Thai society between the largely rural poor -- many of whom still love the populist Thaksin, -- and powerful Bangkok cliques in the palace, military and bureaucracy.
A new Red Shirt rally is planned for Saturday in Samut Sakhon province, 36 kilometers (22 miles) outside Bangkok. A television report also said that there would be one in downtown Bangkok.
The situation has been further inflamed by the issue last week of warrants for Thaksin -- who lives in exile to avoid a jail sentence for corruption -- and 12 other allies for allegedly inciting the protests in Pattaya.
Jakrapob Penkair, a senior Red Shirt leader, told AFP from an unknown foreign location on Monday that the group would continue their campaign against Abhisit.
Thailand´s murky politics were also complicated by the attack on media mogul Sondhi -- whose movement blamed "men in uniform" and not the rival Red Shirts.
The country´s army chief admitted Thursday that some of the bullets used in the assault had come from the military.
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