Yemeni president signals he won't stay beyond 2013

Saleh, an important U.S. ally against al Qaeda, pledged not to hand the reins of government on to his son and appealed to the opposition to call off protests as a big rally loomed.

"I present these concessions in the interest of the country. The interests of the country come before our personal interests," Saleh told parliament and members of the military.

"No extension, no inheritance, no resetting the clock," he said, referring to ruling party proposals on term limits seen as designed to enable him to run again.

The move was Saleh's boldest gambit yet to stave off anti-government turmoil spreading in the Arab world as he tried to avert a showdown with the opposition which might risk drawing people on to the streets in the poverty-stricken state.

He spoke a day before a planned rally by the opposition, dubbed a "Day of Rage" and seen as a barometer of the size and strength of the Yemeni people's will to follow Egyptians and Tunisians in demanding a change of government.

"I call on the opposition to freeze all planned protests, rallies and sit-ins," Saleh said. "I call on the opposition after this initiative to come and form a national unity government in spite of the ruling party majority. We will not allow chaos. We will not allow destruction."

About 5,000 government supporters held a rally in a sports stadium in a suburb of the capital Sanaa on Wednesday, some carrying signs that read "No to sabotage, yes to security and stability" and "Yes to unity, no to separatism."

Yemen, at risk of becoming a failed state, is trying to fight a resurgent al Qaeda wing, quell southern separatism, cement peace with Shi'ite rebels in the north, all in the face of crushing poverty. One third of Yemenis face chronic hunger.

"I think it is very significant," Dubai-based security analyst Theodore Karasik said of the move. "What they are doing in Yemen is trying to not have what happened in Egypt."

"I don't know if it will be enough to satisfy people. It may try to heal some of the cleavages between for example the southern secessionist movement and Sanaa, but is it going to be enough for everyone?"

RALLY TO GO ON

The United States relies heavily on Saleh to help combat al Qaeda's regional Yemen-based arm which also targets neighboring Saudi Arabia, the world's biggest oil exporter.

President Barack Obama telephoned Saleh to express support for his initiative, the state news agency Saba said. "You have handled the situation well, and I look forward to working with you in a good partnership between the two countries," it quoted Obama as saying.

Yemen's biggest opposition party welcomed the initiative but said Thursday's rally in Sanaa would still go ahead. The rally's size and mood will offer the first glimpse of popular reaction to Saleh's concessions.

"We consider this initiative positive and we await the next concrete steps. As for our plan for a rally tomorrow, the plan stands and it will be organized and orderly," said Mohammed al-Saadi, undersecretary of the Islamist party Islah (reform).

"This is a peaceful struggle through which the people can make their voices heard and express their aspirations."

Saleh had already offered lesser concessions on presidential term limits and pledged to raise civil servants' and military salaries by around $47 a month, no small move in a country where about 40 percent of the population lives on less than $2 a day.

However, the pledges on Wednesday went much further.

Saleh promised to delay parliamentary elections due in April to conduct reforms to persuade the opposition the vote will be fair. The delay was not expected to more than several months.

He pledged to re-open voter registration after opposition complaints that around 1.5 million had been unable to sign up, and renewed an offer for a unity cabinet with the opposition.

Saleh also promised direct election of provincial and local governors, which would give Yemenis more say over local affairs, and put on hold all proposed constitutional changes, including on presidential term limits, pending talks with the opposition.

(Additional reporting by Mohammed Ghobari in Sanaa, Erika Solomon and Mahmoud Habboush in Dubai; Writing by Cynthia Johnston; Editing by Andrew Dobbie)