(Updates with comment from Sharif) By Kamran Haider ISLAMABAD, Aug 23 (Reuters) - Pakistan's uneasy coalition partners discussed who should be the next president on Saturday as militant violence added urgency to their task of tackling security and economic problems. Insecurity, uncertainty over the future of the government and economic worries have undermined investor confidence and sent the country's financial markets on a downward spiral. Allies and investors had hoped the resignation of Pervez Musharraf as president on Monday would end wrangling, but the main coalition parties have been unable to settle a dispute over the judiciary that threatens to end their alliance. Another divisive issue is likely to be the next president, due to be elected by members of the four provincial assemblies and national parliament on Sept. 6. The Pakistan People's Party (PPP) of slain former prime minister Benazir Bhutto, which leads the coalition, wants her widower and political successor, Asif Ali Zardari, to be president. He is expected to make a decision this weekend. Senior Bhutto party officials travelled to Lahore on Saturday to discuss the issue with former prime minister Nawaz Sharif, who heads the second biggest party in the coalition. Sharif was non-committal on Zardari's nomination, saying he had to discuss the matter with his party. But he said he wanted the presidency stripped of the power to dismiss parliament. But if the presidency retained that crucial power, then Sharif said he wanted to see a neutral president. "It should be someone who is a national figure, has national stature and is non-partisan," he told a news conference. Pakistan's stocks and currency strengthened when Musharraf stepped down on Monday but have weakened with no end in sight to the infighting between the two main coalition parties. The rupee set a new low of about 77.15 to the dollar on Friday but ended at 76.10/20. Stocks finished 2.4 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 29 percent this year. VIOLENCE The PPP and Sharif's party were bitter rivals during the 1990s when Bhutto and Sharif served two terms as prime minister. Thrown together by opposition to Musharraf, differences are likely to loom larger now that he has gone, analysts say. Their main dispute is over the fate of judges purged by Musharraf last year. Sharif has been demanding they be restored to the bench and had threatened to pull his party out of the coalition if that is not done. The PPP is reluctant to restore the judges because of concern the deposed chief justice might take up challenges to an amnesty granted to Zardari and other party leaders from graft charges last year, analysts say. As the politicians bicker, militant violence has surged. Troops killed 35 militants in fighting in the Swat Valley northwest of Islamabad on Saturday, shortly after a suicide car-bomber killed eight policemen. On Thursday, two suicide bombers killed about 70 people outside the country's main defence industry complex. Sharif let another deadline for the restoration of the judges pass on Friday, saying he had agreed to a parliamentary debate on Monday but wanted their restoration that day. Sharif withdrew his ministers from the cabinet after Bhutto's party missed an earlier deadline, and if his party were to move to the opposition benches in parliament it would not force a parliamentary election, analysts say. Bhutto's party is the biggest in parliament and should be able to gather enough support to remain in government. (Additional reporting by Mubasher Bukhari in Lahore, Writing by Robert Birsel; editing by Robert Hart)
A paramedic provides medical treatment to a suicide blast victim at the Pakistan Ordnance Factories Hospital in Wah, a garrison city about 30 km (20 miles) northwest of Islamabad, August 22, ...
