By Panarat Thepgumpanat and Chayut Setboonsarng
BANGKOK (Reuters) -Thailand's Pheu Thai party will nominate a real estate tycoon to become prime minister as it takes the lead in efforts to form a government after the progressive party that won a May election was sidelined, Pheu Thai said on Wednesday.
Southeast Asia's second largest economy has been in political limbo since the May 14 election, which the Move Forward party won with the backing of young voters tired of rule by military-linked governments, closely followed by the populist Pheu Thai.
Pheu Thai, the latest incarnation of a party founded by former telecoms tycoon Thaksin Shinawatra, said it would nominate Srettha Thavisin in a parliamentary vote for prime minister due on Friday.
It said Move Forward was no longer part of the effort. Despite winning the most seats in the election, it faced relentless opposition from pro-military parties and members of the military-appointed upper house Senate, alarmed by its reform agenda.
"Pheu Thai has supported Move Forward to our fullest ability," Pheu Thai leader Chonlanan Srikaew told reporters, explaining his party's decision to dump its ally and take the lead in forming a government.
Under the constitution drafted during military rule, a joint sitting of the two houses of parliament has to vote for a prime minister, who then forms a government.
Twice Move Forward's attempt to get its leader, Pita Limjaroenrat, voted in as prime minister were blocked by conservatives.
Rangsiman Rome, a Move Forward lawmaker, told reporters he was shocked by Pheu Thai's decision to abandon their alliance.
"I thought we were married. Today ... it's like a divorce," Rangsiman said near Pheu Thai's headquarters, where more than 100 people gathered to protest against the sidelining of Move Forward.
"You betrayed the people," some protesters shouted, referring to Pheu Thai.
Pheu Thai's nominee for prime minister, Srettha, has little political experience. He co-founded Bangkok-listed Sansiri, one of Thailand's largest real estate developers.
Members of a new alliance that will seek to form the next government would be announced on Thursday, Chonlanan said.
The attempt by Pheu Thai to form a government comes as Thaksin plans to return to Thailand after almost 15 years in self-exile.
Thaksin, 74, who was ousted as prime minister in a 2006 coup, is expected back next week, his daughter, who is also a Pheu Thai leader, said recently. He faces up to a decade in jail on convictions for graft and abuse of power, charges that he denied and described as politically motivated.
'SO DISAPPOINTED'
Move Forward rose to prominence with the backing younger voters, many of whom protested for months against a military-backed government in 2020.
Conservative opposition to Move Forward stemmed from a progressive agenda seen by the royalist-military establishment as a threat, in particular a promise to amend a law, known as article 112, that punishes insulting the monarchy with prison of up to 15 years.
Critics say the law has long been used by conservatives to stifle dissent.
Move Forward's secretary general, Chaithawat Tulathon, said opposition to his party's proposal to amend the law was an excuse to block it from power.
"The old powers don't want to see a Move Forward government," he said.
Pheu Thai deputy leader Phumtham Wechayachai said a government led by his party would not support amending article 112 but would focus on solving economic and political problems.
Several hundred protesters assembled in cars and on motorbikes for a noisy show of frustration near the Pheu Thai headquarters in Bangkok.
Some protesters revived a rallying cry from the 2020 agitation, shouting "abolish 112".
Jiraporn Butsapakit, a 75-year-old protester, said she had hoped Pheu Thai and Move Forward could have worked together for democracy.
"I am so disappointed," she said.
(Additional reporting by Napat Wesshasartar, Writing by Devjyot Ghoshal; Editing by Jacqueline Wong, Robert Birsel)
