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SANAA (Reuters) - Yemeni President Ali Abdullah Saleh rejected an opposition plan for him to step aside this year, as protests against his three-decade rule over the impoverished nation swelled into hundreds of thousands.
The opposition said Saleh, a U.S. ally against al Qaeda, was sticking to an earlier plan to step down only when his current term ends in 2013 but had agreed to a proposal by religious leaders to revamp elections, parliament and the judicial system.
"The president rejected the proposal and is holding on to his previous offer," said the opposition's rotating president Mohammed al-Mutawakil.
A spokesman for the president's ruling party, Tarek al-Shami, said Saleh had approved of the opposition plan but wanted it to be modified so he could complete his term.
"He would accept the opposition's plan, including the article about a smooth transition of power, but it needs to be implemented at the end of the president's term in 2013."
Yemen, a neighbour of Saudi Arabia, was teetering on the brink of failed statehood even before recent protests, with Saleh struggling to cement a truce with Shi'ite rebels in the north and quell a budding secessionist rebellion in the south.
"Oh God, God please get rid of Ali Abdullah," demonstrators chanted in the capital Sanaa, where protests stretched back for more than 2 km in the streets around Sanaa University.
Political analysts say growing protests, inspired by unrest that has toppled the leaders of Egypt and Tunisia, may be reaching a point where it will be difficult even for Saleh, a clever political survivalist, to cling to power.
In the north, Shi'ite Muslim rebels accused the Yemeni army of firing rockets on a protest in Harf Sufyan, where thousands had gathered. Two people were killed and 13 injured.
"During a peaceful protest this Friday morning ... demanding the fall of the regime, an end to corruption and political change, a military post fired rockets at a group of protesters and hit dozens of people," a statement from the rebels said.
The government said men had fired on a military post in Harf Sufyan, wounding four soldiers, but denied firing on protesters.
The rebels complain of discrimination by the government and announced their support for the protests in early February. They have been in an uneasy truce with the government since February 2010 to end a war that has raged on and off since 2004.
Clerics sympathetic to the opposition, whose ranks have grown with the defection of Saleh allies, joined protesters in Sanaa for Friday prayers and called on Yemenis to take to the streets to demand Saleh step down.
In another political blow to Saleh, Ali Ahmad al-Omrani, an influential ally, resigned in front of tens of thousands of protesters rallying at Sanaa University on Friday night.
Omrani, a tribal sheikh from the southern al-Baida province, is the tenth parliament member to defect from the 68-year-old leader's ruling party since last week.
Possibly more than 100,000 protested earlier on Friday in one of the largest demonstrations in the capital yet, and similar numbers rallied in Taiz, south of Sanaa.
"This is a corrupt and oppressive regime. God is calling on us to get rid of it," one preacher shouted to crowds in Sanaa, telling them to pray for success in toppling their government.
More than 20,000 protesters marched in Aden, once the capital of an independent southern state, some carrying black flags of mourning for three protesters killed in the city last week. Tens of thousands more marched in Ibb, south of Sanaa.
Opposition leaders said over 500,000 people were protesting in Sanaa and Taiz, but that could not be verified.
Protesters say they are frustrated with widespread corruption and soaring unemployment in a country where 40 percent of its 23 million people live on $2 a day or less and a third face chronic hunger.
Yet cracks have emerged within Yemen's opposition coalition in recent days, when some officials backed a longer time-frame for Saleh to step down and others sided with street protesters demanding an immediate resignation.
The opposition issued a statement late on Friday apologising for the failure of its proposal for Saleh to step down this year, as some representatives switched sides to support a less ambitious reform package accepted by Saleh.
Activists and young protesters, the driving force of protests, have complained their demands for Saleh's immediate resignation were sidelined by the traditional opposition.
Saleh loyalists, in a sign the president can still draw large crowds, organised a counter-protest on Friday attended by about 100,000 people, a Reuters reporter said.
"No to sedition. No to chaos. Yes to stability," they chanted. Police using loudspeakers called on Yemenis joining anti-government protesters to return home, but the demonstrators shouted back that the police should join them.
Additional reporting by Mohammed Mukhashaf in Aden, Mohamed Sudam and Khaled Oweis in Sanaa; Writing by Erika Solomon and Cynthia Johnston