The rupture between the Ennahda party, the Tunisian arm of the Muslim Brotherhood which governs in coalition with secular parties, and the Ansar al-Sharia movement could have ramifications across north Africa, potentially fuelling armed insurrection in Tunisia and neighboring Algeria.

Clashes between police and Ansar supporters on Sunday in which one person was killed and dozens wounded highlighted the rise of fundamentalist Salafist groups in the nascent North African democracy, empowered by a new atmosphere of freedom.

The violence erupted after the government banned an annual preaching rally in the central city of Kairouan, a historic centre of Islamic learning, and other towns. A young man was killed in the Ettadamen district of the capital Tunis.

"It seems like Ennahda have finally put their foot down, but that shouldn't be applauded because over the last two years they have tolerated the growth of Salafism and done nothing about it," said Aaron Zelin, an expert on Tunisia at the Washington Institute for Near East Policy.

"There is likely to be more confrontation in the short to medium term. There could be a cycle of low-level conflict, but neither side has an interest in it becoming larger-scale."

While many Salafists were jailed under the authoritarian rule of former President Zine El Abidine Ben Ali, they have benefited from the freedom created by the revolution that toppled him in January 2011.

Ansar al-Sharia is the most radical Islamist group to emerge in what was long one of the most secular Arab countries. It poses a test to the authority of the moderate Islamist-led government and to the stability of Tunisia, a country of 11 million.

Zelin estimated that the movement, which is not officially registered, has at least 20,000 activists and is gaining support fast among young people disenchanted with Ennahda's failure to anchor Islamic sharia law in the constitution, and alienated by unemployment and lack of economic opportunity.

Ansar's spokesman, Saif Eddine Rais, said last week the group had "tens of thousands" of supporters. Easy to recognize in their bright orange vests, its followers engage in proselytizing and charity work, providing food, medicines and community support in areas where the state is often absent.

The clashes were not the first bout of fighting between Salafists and police. However this time, the government showed its determination to crack down on the radicals as it deployed mass force to prevent the public meeting.

The standoff came as the army pursued dozens of suspected al Qaeda-linked militants near the western border with Algeria. The government accuses Ansar al-Sharia of links to al Qaeda, although the Salafists dispute this.

"Salafists have felt targeted and this has only added to their frustration," said Alaya Allani, a specialist on Islamist groups. "These events are slowing (Tunisia's) democratic transition and delaying the recovery from an economic crisis."

A smaller, more moderate Salafist party, Hezb Ettahrir, had condemned the violence.

AL QAEDA LINKS?

Tunisia was the first country to stage an "Arab Spring" uprising, inspiring similar revolutions in Egypt and Libya. It has since sought to ease economic and financial problems.

The Salafists, who model their lifestyle on the Prophet Mohammad and his companions, seek a broader role for religion in public life, alarming a secular elite which fears this could undermine individual freedoms, women's rights and democracy.

In a sign they do not recognize the state, protesters on Sunday burned Tunisian flags and in some places replaced them with a black banner in support of Al Qaeda. Chants included "The rule of the tyrant must fall" and "Join the Muslim army".

Ansar al-Sharia, whose fugitive leader Saifallah Benahssine - also known as Abu Iyadh - is a former al Qaeda fighter in Afghanistan, is seeking to establish an Islamic state in Tunisia and says democracy is blasphemous.

At a news conference ahead of the planned rally, spokesman Rais said: "Now we have institutions, the structure and we are preparing ourselves to apply the law of God in Tunisia. We will only take part in elections if only Islamists can participate."

Rais was arrested in Kairouan on Sunday and Ansar al-Sharia has called for protests on Friday to demand his release, possibly setting up another round of clashes.

In September, thousands of Salafists attacked the U.S. embassy. Four people were killed in the disturbances, which began as a protest over a film that mocked the Prophet Mohammed. Benahssine has been in hiding since then.

Salafists have also attacked cinemas and wine vendors, picketed secular cultural events and universities, and burned Sufi Muslim shrines. But so far there have been few arrests despite pressure from the United States and former colonial power France.

Police also blame a Salafist who is on the run for the assassination of secular opposition politician Chokri Belaid on February 6, which provoked the biggest street protests in Tunisia since the overthrow of Ben Ali.

The latest crackdown came after the army said 10 Tunisian soldiers were wounded near the Algerian border in mine explosions in the Jebel Chaambi mountain region where Islamist militants are said to be setting up a training camp.

In the past few months, police have found large caches of weapons in Tunis and other cities and arrested 16 militants who they said were seeking to establish an Islamic state.

Prime Minister Ali Larayedh said on Saturday Ansar al-Sharia was linked to terrorism, although the authorities have produced no proof. The same day, the regional arm of al Qaeda issued a statement urging the group to defy the crackdown.

Many Tunisians say they fear for their peace and civil liberties if radical groups become too powerful.

"The revolution gave Salafists freedom and they want to impose their way by force," said Alia Sassi, 24, who works in a travel agency. "There is a real fear jihadis will pass onto bombings. We want to live in peace, we don't want our country to become a new Afghanistan."

Ennahda faces a balancing act. If it arrests more Salafists and forces Ansar al-Sharia underground, it could drive more young Tunisians towards violence, harming the economy and alienating its own more conservative wing.

Ennahda's veteran moderate leader Rachid Ghannouchi left the door ajar last week, saying: "I am always for dialogue with the Salafists if they don't carry arms and want to talk, but there can be no dialogue now with terrorists who are carrying arms in Jebel Chaambi."

ALGERIA WORRIED

Diplomats say neighboring Algeria, which fought a decade-long civil war with Islamists in the 1990s in which more than 150,000 people died, is deeply concerned and has reinforced army units at the Tunisian border.

"Algeria is clearly very worried and feels almost a siege mentality," Zelin said, noting that the overthrow of Muammar Gaddafi in Libya in 2011 and French military intervention against al-Qaeda-affiliated Islamist rebels in Mali this year had increased the flow of weapons and fighters onto its soil.

Paradoxically, Egypt's Salafists have taken the opposite direction to their Tunisian counterparts.

All the main radical Islamist movements, including those involved in armed struggle in the 1990s and the assassination of former President Anwar Sadat, have renounced violence and joined the political system, and none has lent support to al Qaeda militants operating in the lawless Sinai peninsula.

Indeed, the largest Egyptian Salafist group, the Nour party, is seeking to project itself as more democratic and open than the ruling Muslim Brotherhood.

Etisalat has yet to hear back from Vivendi on its bid for the French firm's 53 percent stake in Maroc Telecom, the chief executive of the United Arab Emirates No.1 telecom operator said on Wednesday.

Etisalat and regional rival Ooredoo (Ooredoo) both made binding bids for the stake in late April.

But Etisalat has yet to hear back from Vivendi, the UAE firm's CEO Ahmad Julfar told reporters on the sidelines of a conference in Dubai.

Etisalat has not bid for the Morocco government's 30 percent stake in Maroc Telecom, Julfar said.

Under Morocco financial rules a buyer could be obliged to launch a bid for the free float shares.

"Qatari officials have shown their willingness to support us," he told a news conference.

He did not give details on the amount being discussed but some officials sources have said it could be around $1 billion.

Larayedh, who travelled to Doha last week, said Qatari officials had said they were "ready to boost investments in Tunisia."

Last month, the International Monetary Fund said it had reached a $1.75 billion loan deal with Tunisia to ease the country's financial problems since a revolution that topped the former regime two years ago.

The North African country is struggling with rising inflation, a big external deficit and an uncertain political outlook.

The February assassination of opposition politician Chokri Belaid ignited the worst street violence since the revolution. Elections expected towards the end of this year will create fresh uncertainty.

Larayedh said economic growth in the first quarter of this year was 2.7 percent.

Last month, the Qatari government agreed to provide an additional $3 billion of aid to Egypt.

A statement posted on the internet on Friday was signed by Khalid Abu al-Abbas, better known as Mokhtar Belmokhtar, a leading figure in al Qaeda in the Islamic Maghreb (AQIM).

At least 21 people were killed and dozens wounded in coordinated dawn assaults on a uranium mine run by French company Areva at Arlit and the military base in Agadez, Niger, on Thursday.

The statement said the raid was a response to Niger's participation in operations in neighboring Mali and claims by Nigerien President Mahamadou Issoufou that the Islamists had been defeated.

"This is the first of our responses to the statement of the president of Niger - from his masters in Paris - that he eliminated jihad and the mujahideen militarily," it read.

"We will have more operations, by the strength and power of Allah, and not only that, but we will move the battle to the inside of his country if he doesn't withdraw his mercenary army."

Members of the brigade took part in the attack alongside fighters from the Movement for Oneness and Jihad in West Africa (MUJWA) it said. MUJWA, an Islamist group based in the desert Sahel and Sahara regions, claimed responsibility earlier for the Niger attacks.

The statement was sent to Mauritania's ANI news agency and posted on radical Islamist internet forums. It was also posted and translated into English by jihadist monitoring group SITE, but its authenticity could not be independently verified.

Belmokhtar's men were among 40 jihadist fighters who raided the desert facility at In Amenas, Algeria, in late January, leaving scores of militants and hostages, many of them western workers, dead.

MUJWA and al Qaeda's North African wing AQIM pledged to strike at French interests across the region after Paris launched a ground and air campaign in January that broke their 10-month grip over the northern two-thirds of Mali.

The North African kingdom raised $750 million on Wednesday in a two-part reopening of its $1.5 billion bond, with $500 million for the $1 billion 4.25 percent (Dec 2022) and $250 million for the $500 million 5.5 percent (Dec 2042).

"We are satisfied," Baraka told Reuters.

Following loan agreements with the African Development Bank, the Islamic Development Bank and the World Bank, among others, Morocco is preparing to issue its first sukuk bonds.

"It will be the same amount as the reopening of the bond, maybe more if the market is favourable," a finance ministry source said.

Last January, parliament approved legislation allowing the government and companies to issue sukuk, in a move interpreted by analysts as a break with the sensitivity of the Moroccan government about resorting to Islamic finance.

"If there is no current conventional bond, we would raise the whole need in sukuk," the source said.

Cash-strapped Morocco is considering several reforms in the pension and taxation systems, provoking fears of instability while the government is facing the euro crisis and the continuing ripples in the region of the Arab Spring.

The second government party is threatening to quit the coalition unless the Islamist-led government moderates plans for sweeping cuts to subsidies on food and energy.

The political circles around King Mohammed want to avoid a drop in living standards and prevent a return to protests that he brought under control in 2011 with social spending, robust policing and constitutional reforms that paved the way for the PJD (Justice and Development Party) to come to power.

Communication Minister Mustapha Khalfi said the cabinet will continue to make reforms despite resistances.

"I want to underline the government's determination to pursue reforms and assume its responsibilities," he was quoted as saying by the state news agency.