* Two killed in violence

* Troops open fire, protesters use firebombs

* Troops move into Government House area

(Adds details)

By Martin Petty

BANGKOK, April 13 (Reuters) - Troops fired at crowds of anti-government protesters who fought back with petrol bombs and rocks in Bangkok on Monday, in violence that killed two people, injured dozens and pushed Thailand deeper into political crisis.

Prime Minister Abhisit Vejjajiva, who declared a state of emergency in Bangkok on Sunday after former premier Thaksin Shinawatra's supporters forced an Asian summit to be cancelled, said just before midnight most of the city was back to normal.

Thaksin, ousted in 2006 coup, told CNN from an undisclosed location: "Many people are dying ... They even take the bodies on the military trucks and take them away."

During the day, black smoke billowed into the sky over the city of 12 million, protesters set fire to several buses and a side of a government building was ablaze. The violence erupted before daylight at the start of the Thai New Year holiday.

One person was shot dead in fighting between protesters and residents angry about the demonstrations, Satit Wongnongtaey, a minister at the prime minister's office, said on television.

A hospital said another person was also fatally shot in the violence, sparked by Thailand's intractable political divide pitting royalists, the military and the urban middle-class against a less well-off rural majority loyal to Thaksin.

The Emergency Medical Institute said 94 people, including soldiers, were injured in Monday's clashes.

Troops advanced into an area held by protesters near Abhisit's office, setting the stage for a final push to end the demonstrations that have further hobbled a country still also reeling from the global financial crisis.

Hundreds of troops with riot police behind them lined up on roads approaching Government House, where red-shirted supporters of Thaksin -- living in exile to avoid jail on a corruption conviction -- have been encamped since late March.

The army also set up roadblocks to stop demonstrators elsewhere in the city from getting to the Government House area.

Several thousand "Red Shirts", as the opposition supporters have been dubbed, were still at Government House as night fell.

Abhisit appeared on television to urge the protesters to leave and guaranteed their safety.

Thailand's top military commander, General Songkitti Chakabakr, said in a statement the committee charged with restoring order would strive "through every peaceful means" to bring the situation back to normal as soon as possible.

HIGH-PROFILE ASIAN SUMMIT

Monday's clashes occurred two days after protesters forced the cancellation of a high-profile Asian summit in Thailand, a big embarrassment for Abhisit who took office only in December.

Standard & Poor's and Moody's, both of which already have a negative outlook on Thailand's sovereign ratings, said the renewed political unrest increased the risk of a downgrade. [ID:nSP483923]

"Tourism can rebound, but investor confidence will be very hard to get back. Going forward we expect investors will become a lot more risk averse," said S&P analyst Kim Eng Tan.

"I believe the darkest days in Thailand's history are yet to come as we see no swift solution to ongoing divisiveness," said Prinn Panitchpakdi, a CLSA Asia-Pacific analyst.

Several countries issued cautionary advisories on travel to Thailand.

The violence began before dawn, much of it near one of the city's central traffic hubs, Din Daeng junction, which protesters had blockaded.

Troops charged makeshift road barricades, firing assault rifles into the air and toward the demonstrators.

Last year, politicians backed by the "Red Shirts" were in power and royalist "Yellow Shirt" supporters of those now in government held nearly non-stop protests, culminating in a week-long occupation of Bangkok's main airport.

The political strife died down for a while after Abhisit came to office through parliamentary defections that Thaksin supporters say the army engineered. They demand a new election.

Protests flared anew after Thaksin set a deadline for Abhisit to resign by April 8 -- the day before Thailand was to host the now abandoned East Asia Summit in the Pattaya resort.

His supporters descended on the beach resort south of Bangkok, smashed their way through a cordon of troops into the venue and forced an evacuation of summit leaders by helicopter.

Thailand has had 18 coups since 1932 and the military often has the final say in Thai politics, sometimes with the blessing of the king. (Additional reporting by Vithoon Amorn, Kittipong Soonprasert, Panarat Thepgumpanat and Andrew Marshall; Writing by John Ruwitch and Bill Tarrant; Editing by Ralph Gowling)

AlertNet news is provided by