(Adds details and quotes)

By Matt Spetalnick

WASHINGTON, Nov 5 (Reuters) - U.S. President George W. Bush urged Pakistani President Pervez Musharraf on Monday to lift a state of emergency and hold elections but stopped short of threatening to cut off billions of dollars in U.S. aid.

Bush, in his first public comment on the crisis, said he had instructed Secretary of State Condoleezza Rice to call and convey that message to Musharraf, who defied U.S. pressure when he imposed emergency rule on Saturday and detained hundreds of political opponents.

"We expect there to be elections as soon as possible and that the president should remove his military uniform," Bush said after White House talks with Turkish Prime Minister Tayyip Erdogan. "Our hope is that he will restore democracy as quickly as possible."

But softening his remarks, Bush also pointed out that Musharraf "has been a strong fighter against extremists and radicals. ... After all they tried to kill him three or four times."

Bush is trying to walk a difficult line between criticizing Musharraf for setting back Pakistan's democratic transition and alienating a leader the administrations considers a crucial ally in the battle against al Qaeda and the Taliban.

But it is a balancing act that also underscores the fact that Washington has few options.

Musharraf's emergency decree dealt an embarrassing blow to Bush, calling into question not only his unstinting support for the Pakistani leader but his broader pro-democracy push in the Muslim world.

Rice called Musharraf last week but failed to dissuade him from going ahead with the state of emergency, which included suspension of the constitution and purging of the Supreme Court. The crackdown has drawn international criticism.

"Previous to his decision, we made it clear that these emergency measures would undermine democracy," Bush said.

U.S. AID UNDER REVIEW

Washington has said it is reviewing all aid to Pakistan, though any cutoff or reduction could risk undermining Pakistan's cooperation on counterterrorism. The United States has given Pakistan $10 billion in the past five years.

Bush refused to say whether there would be any consequences in terms of aid should Musharraf refuse to budge.

"It's a hypothetical question. I certainly hope he does take my advice," he said.

A senior U.S. official said the administration had been encouraged by the Pakistani government's assertion on Monday it would go ahead with a national election by mid-January.

Musharraf also pledged to give up his military role in nuclear-armed Pakistan and become a civilian president.

But it remained unclear when Musharraf would lift emergency rule, which he had insisted was needed to thwart a hostile judiciary and spiraling Islamic militancy.

Before issuing his decree, Musharraf had been waiting for the Supreme Court to decide whether his re-election as president while still army chief was valid.

Since Saturday, U.S. officials have pressed for a return to a democratic path but stopped short of outright condemnation of Musharraf, who seized power in 1999 in a bloodless coup.

While concerned about his democratic credentials, they are mindful that he took a big risk by throwing his support behind the United States after the Sept. 11 attacks and cooperating in the fight against al Qaeda and Osama bin Laden, believed to be hiding out along the remote Pakistan-Afghanistan border.

Despite that, Democratic lawmakers stepped up criticism of Musharraf and called for scrutiny of U.S. assistance.

"Congress and the Department of State should review all relevant economic and military aid from which Pakistan currently benefits in order to ensure that taxpayers' money is advancing American interests in the region," said Nita Lowey, a New York Democrat who chairs the House Appropriations subcommittee on State and foreign operations. (Additional reporting by Caren Bohan and Andy Sullivan, editing by Patricia Wilson and Eric Beech)

AlertNet news is provided by