TRIPOLI/TAWARGA, Libya (Reuters) ? Libyan forces backed by NATO bombers struck at loyalist troops dug in around Muammar Gaddafi's home town on Wednesday, and refugees streamed out of the besieged bastion, fearing a bloody showdown in the coming days.
A week after they overran the capital, forcing Gaddafi into hiding, the irregular troops of the new ruling council have paused in a drive to take Sirte and Gaddafi strongholds in the desert, giving defenders of his native city until Saturday to surrender. But frontline clashes continued, as did air strikes.
Despite shortages and disruptions, people in Tripoli, Misrata, Benghazi and other cities took to the streets to celebrate the Eid al-Fitr holiday, a high point of the Muslim calendar marking the end of the Ramadan fast. For most Libyans, it was the first Eid they could remember without Gaddafi.
Anxious to aid -- and steer -- the new rulers of the oil-rich North African state, and to consolidate their own victory over a man who has baffled and infuriated them for 42 years, Western governments will hold a "Friends of Libya" meeting in Paris on Thursday. The date, Sept. 1, is laden with symbolism as the anniversary of Gaddafi's seizure of power in 1969.
Until the 69-year-old fugitive is hunted down, dead or alive, the National Transitional Council's leaders say they will not count their country's "liberation" as complete. But though there is much talk of closing in on Gaddafi and his sons, of tempting loyalists to betray them and of tracking their communications, it is unclear where the key figures are.
Hisham Buhagiar, a senior NTC official who is coordinating the hunt, told Reuters he believed Gaddafi was either in the Bani Walid area, southeast of Tripoli, or in his home town of Sirte, 450 km (265 miles) east of the capital.
The arrest in Tripoli on Wednesday of Gaddafi's foreign minister, Abdelati Obeidi, as witnessed by a Reuters journalist may provide more clues: "We trace a lot of people who are not in the first inner circle with him, but the second or third circle. We're talking to them," said Buhagiar. "They want to strike deals ... Everyone who helps us is on the white list."
In another twist, one of Gaddafi's sons, Saadi, told an Arab television channel that he was in touch with his father's enemies to try and end the bloodshed -- though it was unclear whether he was with his father or speaking on his behalf.
VIOLENCE
While the threat of an Iraq-style insurgency led by those loyal to the old guard is clearly a worry to the new leaders, their international backers are also concerned that the NTC can overcome regional, ethnic and tribal differences across Libya.
There has been praise from abroad for its rhetoric of equality, fairness and willingness to bury past grievances, though there is also disquiet at evidence of harassment, and worse, by victorious fighters of some groups, notably black Libyans and African migrants, widely seen as allies of Gaddafi.
At Tawarga, where anti-Gaddafi forces are dug in and readying an assault on Sirte to the east, most of the residents were black African rather than Arab in origin and have recently fled -- apparently in fear of reprisals by fighters from the city of Misrata who see Tawarga as a pro-Gaddafi town.
Also fleeing their homes were hundreds of people from towns around Sirte, who streamed through a frontline checkpoint set up by NTC forces on the coastal highway at Tawarga.
"I need to take my family where it is peaceful," said one man named Mohammed, as laden vehicles flying white flags were checked for weapons. "Here there will be a big fight."
Ali Faraj, a fighter, said he doubted people in Sirte would willingly join the revolt: "There will be a big fight for Sirte. It's a dangerous city. It's unlikely to rise up," he said. "A lot of people there support Gaddafi. It's too close to Gaddafi and his family. It is still controlled by them."
There is no independent confirmation of conditions in Sirte, which was developed into a prosperous city of 100,000 during the 42 years Gaddafi ruled Libya. NTC officials say power and water are largely cut off and supplies are low.
CELEBRATION
In Tripoli, after dawn, worshippers packed Martyrs' Square, which was named Green Square in the Gaddafi era, chanting "Allahu Akbar (God is greatest), Libya is free".
Fighters on rooftops guarded against any attack by Gaddafi loyalists and sniffer dogs checked cars. Even the interim interior minister, Ahmed Darat, was searched.
"This is the most beautiful Eid and most beautiful day in 42 years," said Hatem Gureish, 31, a merchant from Tripoli.
"Gaddafi made us hate our lives ... We come here to express our joy at the end of 42 years of repression and deprivation."
Fatima Mustafa, 28, a pregnant woman wearing a black chador, said: "This is a day of freedom, a day I cannot describe to you. It's as if I own the world. I'm glad I haven't given birth yet so my daughter can be born into a free Libya."
Libyans who revolted against Gaddafi in February needed NATO air power to help them win, but, given their country's unhappy colonial history, they remain wary of foreign meddling.
Their interim leaders, trying to heal a nation scarred by Gaddafi's cruelly eccentric ways, may want United Nations help in setting up a new police force, but see no role for international peacekeepers or observers, a U.N. official said.
The NTC, keen to assert its grip and relieve hardship after six months of war, won a $1.55 billion cash injection when Britain's air force flew in new dinar banknotes to Benghazi. They had been printed in Britain but then held there by U.N. sanctions imposed on Gaddafi's government.
France, which with Britain took a lead role in backing the revolt and will host Thursday's conference, has asked the committee to unfreeze some $2 billion of Libyan assets in France, a French government source said on Wednesday.
Despite the killing and shortages of fuel, power and water that Tripoli has endured since Gaddafi's fall, worshippers in Martyrs' Square were mostly ebullient about the future.
But Nouri Hussein, 42, an engineer, said that while he was glad Gaddafi was gone, he feared the guns in the hands of unruly fighters: "There is apprehension about what next. The rebels should not be blinded with the ecstasy of victory."
NTC leaders have told their forces to treat prisoners with respect -- in contrast with the reported killing and torture of detainees by Gaddafi's forces -- but Amnesty International said its staff had seen anti-Gaddafi fighters threaten and detain wounded opponents, notably black Libyans and foreigners.
(Additional reporting by Mohammed Abbas in Tripoli, Emma Farge, Robert Birsel and Alex Dziadosz in Benghazi, John Irish in Paris, Justyna Pawlak in Brussels and Giles Elgood, Richard Valdmanis and Alastair Macdonald in Tunis; Writing by Alistair Lyon and Alastair Macdonald; Editing by Elizabeth Fullerton)
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