(Adds governor refusing to quit, government comment)

By Frank Jack Daniel

OAXACA, Mexico, Nov 3 (Reuters) - Leftists rebuilt smashed barricades and readied firebombs as riot police guarded the center of Mexico's colonial city of Oaxaca on Friday after a new round of violence in a months-long political crisis.

Around 50 protesters wearing ski masks crouched behind burned-out buses and cars in a street close to a university on the city's outskirts that was a flashpoint for several hours of fierce clashes on Thursday, when police were forced to retreat under a hail of rocks and Molotov cocktails.

On another street, protesters blocked off traffic by parking two buses across the road and threatened to set fire to them if police returned in another sweep in their armored trucks.

"We have built the barricades again to be prepared," said Alberto, a protester in his late 20s who declined to give his full name. Bottles of gasoline were lined behind him ready to be thrown.

President Vicente Fox sent thousands of federal police to take over Oaxaca last weekend in a bid to end the 5-month-old conflict that has killed more than a dozen people and raised fears it could spark violent protests elsewhere.

The police quickly seized Oaxaca's picturesque colonial center, which draws tourists from around the world, but have failed to bring the rest of the city under control. At least 10 officers were seriously injured in Thursday's riot.

In the leafy central Zocalo square, hundreds of police with riot shields, some armed with automatic rifles, stood guard on Friday. Their gray-and-black body armor was piled neatly next to police trucks.

A rowdy group of 50 health union activists marched to the square and squared off for several hours in front of riot police shouting "murderers" in their faces.

The square's cafes and bars have reopened, but tables were empty.

NOT HOOKED ON POWER

The city's tourist trade has slumped since the crisis began in May, when teachers went on strike. They were then joined by leftist and Indian groups, all demanding that Oaxaca state Gov. Ulises Ruiz step down and accusing him of corruption and brutality in crushing dissent.

"My head is not on the negotiating table," Ruiz told reporters on Friday. "I am not hooked on power, I was democratically elected and I do not believe that shouting ... and barricades can bring down authorities."

Fox had promised to resolve the crisis before Dec. 1, when he hands over power to President-elect Felipe Calderon. The government said this week ending the crisis might take much longer.

But Public Security Minister Eduardo Medina said on Friday riot police will restore order to Oaxaca city before Fox leaves office, and without using troops on standby in the state, who are keeping a low profile.

"We think we can return life to normal in the city very soon," Medina said.

Oaxacan residents see the conflict lasting months.

"The riot police are not going to be here a week or two, they are going to be here for two or three months until order is established," said Fabian Jeronimo Gaudencio, 33, a member of the municipal police force that was forced out in June and has been unable to patrol the city since.

Fox sent federal forces to Oaxaca after gunmen apparently linked to local officials shot and killed three people a week ago, including a U.S. journalist. (Additional reporting by Tomas Sarmiento) (Writing by Chris Aspin, editing by Mohammad Zargham; Reuters Messaging: chris.aspin.reuters.com@reuters.net +52 55 5282-7153))

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