Pakistan's Sharif pulls party out of coalition

Sharif said his main coalition partner, the party of assassinated former Prime Minister Benazir Bhutto which leads the coalition, had repeatedly broken promises on resolving a judicial dispute and on who should be the next president.

"We therefore feel that these repeated defaults and violations have forced us to withdraw our support from the ruling coalition and sit on the opposition benches," Sharif told a news conference.

The departure of his party is not expected to force a general election as Bhutto's Pakistan People's Party (PPP) should be able to gather enough support to govern, analysts say.

The coalition, formed after former president Pervez Musharraf's allies lost a February parliamentary election, had looked increasingly precarious since Musharraf resigned a week ago.

Sharif's party repeatedly threatened to leave the coalition if judges Musharraf purged last year were not restored to office. Last week, he set Monday as his latest deadline.

Another divisive issue is who should be the nuclear-armed country's next president.

The PPP announced on Saturday that Bhutto's widower and political successor, Asif Ali Zardari, would be its candidate.

Sharif said that violated an earlier agreement with the PPP for a non-partisan candidate if the presidency retained certain powers, including dismissing parliament.

Sharif named his party's candidate for president, a former chief justice, Saeeduzzaman Siddiqui.

Members of the four provincial assemblies and two houses of the national parliament will elect a new president on Sept. 6.

As the politicians bicker, militant violence has surged in Pakistan, considered on the front lines in the war against terrorism by allies like the United States.

Pakistani Taliban gunmen attacked a district government official's home in the Swat Valley, northwest of Islamabad, on Monday, killing three family members and seven guards.

Signaling what could be a new Taliban tactic to undermine foreign forces in Afghanistan, gunmen in the port city of Karachi set fire on Sunday night to two armored vehicles bound for U.S. forces in Afghanistan.

The violence and political uncertainty, on top of weak economic data, have undermined investor confidence and sent the country's financial markets sharply lower.

The Pakistani rupee closed at a record low of around 76.60/70 to the dollar on Monday. Shares were nearly 2 percent lower.

Pakistan's stock market, which rose for six consecutive years to 2007 and was one of the best-performing markets in Asia in that period, has fallen about 30 percent this year.