Pro-government soldiers backed by armored cars encircled the complex in the Makati financial district where around 150 disaffected troops were locked in talks to end what the government said was an attempted coup.

As night fell and a second surrender deadline expired at 1100 GMT, there were no signs of an impending military assault and former general Roy Cimatu was inside the complex trying to broker a peaceful solution.

Around 200 mutineers took over the Ayala Center early Sunday and set up booby traps after they were publicly accused of plotting a coup. Some 50 soldiers surrendered shortly before a first ultimatum expired at 0900 GMT.

The rebels, sporting red arm bands and led by young officers, accused Arroyo of corruption and staging terrorist attacks in the south to gain US military aid. They are demanding her government step down.

Arroyo, who came to power in a military-led popular uprising in 2001 and received full support from military chief General Narciso Abaya, warned the rebels they would face an all-out military assault.

She also issued a proclamation giving the military emergency powers to "suppress and quell the rebellion" -- the eighth military uprising in the Southeast Asian nation in the past 17 years.

Around 300 foreigners and residents who were trapped in the Ayala Center overnight were allowed to leave. Among those who emerged from the Oakwood Tower high-rise condominium was Australian ambassador Ruth Pearce. She appeared tired and drawn, but said she had not felt threatened.

The United States and Australia led support for Arroyo, seen as a key partner in the war against Islamic militant terrorist groups in the aftermath of the October 2002 Bali bombing.

"No one should be under any doubt that we fully support the legitimate civilian government of President Gloria Macapagal Arroyo," State Department spokeswoman Joanne Moore said.

Speaking in Singapore, Australian Foreign Minister Alexander Downer said his government considered the rebellion "entirely unacceptable".

"This comes at a very difficult time when the Philippines is in the forefront of the war against terrorism," Downer said. "The last thing any of us wants at this time is this kind of instability."

The rebels took over the complex of high-rise apartment blocks and shopping centers hours after Arroyo Saturday accused the soldiers of attempting a coup. She ordered their arrest and vowed the "maximum" penalty for them.

Rebel spokesman Navy Lieutenant Senior Grade Antonio Trillanes denied the group was trying to stage a coup.

"We mean no harm to anyone. We are putting these (bombs) to defend ourselves," he said.

Trillanes was among 10 officers who were identified as being part of the plot, all of them under 32 years of age.

The rebels claimed to have some 2,000 military supporters and Interior Secretary Jose Lina accused ex-military coup plotter-turned opposition senator Gregorio Honasan of involvement.

Honasan, a former army colonel popularly known as "Gringo", led two of the seven bloody coup attempts in the 1980s but was pardoned under a peace deal after which he entered politics.

Military intelligence chief Brigadier General Victor Corpus said "big time" personalities were behind the coup, while police raided a house owned by jailed former president Joseph Estrada where they alleged they found ammunition and red rebel arms bands.

Rumors that a military clique was plotting to overthrow the government gripped Manila last week but Arroyo dismissed them when she met with a group of junior officers unhappy over pay and corruption.

The mutineers Sunday accused the government of selling ammunition and weapons to Muslim separatist and communist rebels.

The group also accused Arroyo of planning to declare martial law in August, by using bombings in the capital as a pretext to stay in power after her term ends following May 2004 elections. She has promised not to contest the polls.

Security was beefed up at the presidential palace with armed guards ringing the perimeter of the compound.

WAR.WIRE