The New Nation - Internet Edition

Reuters, Islamabad

Pressure mounted on Pakistan's President Pervez Musharraf on Wednesday to resign or face impeachment but aides rejected media speculation he was about to step down.

Musharraf has been at the centre of a political crisis since early last year that has raised fears among the United States and its allies for the stability of the nuclear-armed Muslim country, which is also a hiding place for al Qaeda leaders.

The ruling coalition government, led by the party of assassinated former prime minister Benazir Bhutto, said last week it aimed to impeach the former army chief and firm U.S. ally for years of misrule.

Speculation has been rife that Musharraf, who seized power in a 1999 coup, would quit rather than face impeachment.

Politicians across the country have been calling on him to face a vote of confidence or be impeached. More added their voices to the chorus of opposition on Wednesday.

The Daily Times newspaper cited an unidentified politician from a pro-Musharraf party as saying the president would announce a decision to quit on Independence Day on Thursday.

But Musharraf's spokesman denied the report.

"Newspapers in Pakistan, I'm afraid, dream up things then start writing about them. There's no such thing," said the spokesman, retired Major General Rashid Qureshi.

The prospect of a showdown is unnerving investors, with the rupee setting a new low of around 75.05/15 to the dollar and stocks hovering near two-year lows.

A crucial question is how the army, which has ruled for more than half the 61 years since the country's creation, will react, but coalition leaders said on Tuesday the army and its main security agency would not intervene to back their old boss.