Thailand's parliament is holding a special session prompted by days of street protests in which an anti-government group has stormed government buildings, a state-run TV station and police headquarters.
The People's Alliance for Democracy (PAD) is calling for Samak Sundaravej, the prime minister, to resign.
Samak has refused, but on Sunday admitted in a televised speech that the situation was deteriorating.
The PAD, lead by a mix of businessmen and academics, has been supported by a number of labour unions, forcing some airports and rail services to close.
The PAD argues that Samak is a proxy for Thaksin Shinawatra, who was ousted from the post of prime minister by the army in 2006 and who has now fled to London to avoid corruption charges.
Larry Jagan, a political analyst, told Al Jazeera: "Samak is likely to come under a lot of criticism from the opposition democrats. It's the beginning of the end.
"The real issue is the economy. We have seen the bhat at its lowest against the dollar since December.
"Samak has said he's not going to clal snap olls, but I suspect we are going to see him stand down."
Before the session Samak said in a national address: "I am not afraid but I am concerned about chaos in the nation."
Protesters remained camped on the grounds of Samak’s office on Sunday.
Police have used tear gas on occasion, but have chosen to take a non-confrontational approach at other times, leaving the protest to take on a carnival-like atmosphere.
Al Jazeera's Selina Downes, reporting from Bangkok, said that a pro-government lobby had started to gather near the demonstrators outside Government House office complex.
"There are about 1,000 government supporters. They call PAD a political mafia and argue that this government was elected. They say they are trying to uphold the principles of democracy, so the prime minister has been thrown something of a lifeline."
Low-key policing
On Sunday there was no visible police presence at the prime minister's compound.
"We cannot let the seizure of Government House continue indefinitely without taking action," Samak said.
Samak concedes that his government and the courts have failed to evict protesters and now needs the support of the parliament.
"Since the government cannot resolve the problem - even the courts cannot resolve the problem - the joint session of parliament is the best choice for finding a solution," he said.
On Saturday, Samak met King Bhumibol Adulyadej, the head of state. Reporters had expected him to make a statement on his return to Bangkok, the capital, but he avoided them at a military airfield.
The unrest reached a peak on Friday when Bangkok police fired tear gas and rubber bullets to repel an assault on their headquarters by about 2,000 protesters.
Thousands of foreign tourists had been stranded on the resort of Phuket, damaging the country's image as a holiday destination, after the island's airport closed. It was reopened on Sunday.
Election
Speculation is growing that Samak will call a snap election. His People Power Party has strong support in the rural areas.
Parliament is to debate the government budget for the coming year on Wednesday. It is expected to be approved and would give sitting ministers funds to spend in ways that would support their election prospects.
Thai shares have fallen 23 per cent since the street protests began in May amid fears of major unrest or policy paralysis at a time of stuttering economic growth and high inflation.
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Thai police
Al-Jazeera