|Protesters' demands for the government to step down erupted into violence in Bangkok on Saturday when 21 people were killed in clashes with security forces [AFP]
Thailand's election commission has found the ruling party guilty of misusing poll donations and recommended its dissolution.
The case centres on allegations of an illegal multimillion-dollar donation to the Democrat Party during its 2005 national election campaign, when Abhisit Vejjajiva, the current prime minister, was the deputy leader.
"We know about the EC decison but the case is not over yet. It must be investigated by the attorney-general and then go to the constitutional court," Buranaj Smutharaks, a government spokesman, said on Monday.
The anti-government movement, represented by protesters in red shirts, has pushed election authorities for the decision.
The call for new elections was echoed by General Anupong Paochinda, Thailand's army chief, who was seen as a staunch supporter of the prime minister. But he said on Monday that dissolving parliament might resolve the country's political crisis.
"If the issue cannot be resolved through political means, then parliament dissolution seems to be a reasonable step," he said.
"I just want peace to prevail."
The developments follow the country's deadliest civil unrest in 18 years.
Protesters' demands for the government to step down erupted into violence in Bangkok, the Thai capital, on Saturday when up to 21 people were killed in clashes with security forces.
Autopsies carried out on the bodies of nine protesters killed in the clashes revealed they were struck by live rounds.
The Thai army has said it used only rubber bullets during the clashes.
The limited information released from the autopsies keeps unclear who fired the fatal bullets.
Al Jazeera's Tony Birtley, reporting from a red shirt protest camp in central Bangkok, said the coroner's announcement on Monday left many questions unanswered, including the calibre and specifications of the ammunition involved which would give clues as to its origin.
The news came as Thailand's prime minister, speaking in a nationally televised address, said that "terrorists" were behind the unrest.
"From the overall picture we clearly found that terrorists used pro-democracy protesters to incite the unrest, hoping for total change in our country," Abhisit said.
He said that a committee would investigate the clashes but insisted that peaceful demands for democracy should be addressed through the political process.
Earlier, leaders of the red shirts vowed there would be no negotiations with the government, saying they would continue with protests until Abhisit stood down and called fresh elections.
Hundreds of red shirts joined on Monday what they said were funeral processions, carrying coffins through the streets of Bangkok in memory of supporters who died in Saturday's violence.
Al Jazeera's Wayne Hay, reporting from Bangkok, said the protesters viewed the march through the city as a way to "show the residents of this city, the Thai people, what the government did to them".
He said they were also expected to try to take the coffins to Abhisit's home.
Abhisit has based himself at a secure army barracks during the escalating crisis and is not expected to be at his home.
Businesses in the Thai capital are suffering because of the ongoing standoff
The red shirts, many of them supporters of Thaksin Shinawatra, the former prime minister ousted in a 2006 coup, have been staging non-stop protests for more than a month seeking to force Abhisit to resign and call fresh elections.
They say Abhisit, who came to power following a parliamentary vote in late 2008, is illegitimate.
The red shirts see Abhisit as a symbol of the ruling elite they say was behind the 2006 coup that removed Thaksin from power.
In one possible sign of movement, however, the Bangkok Post on Monday reported that the government may be willing to consider an offer to dissolve parliament in six months - three months earlier than Abhisit's most recent proposal - to pave the way for new national elections.
The plan is being seen by some in the government as a possible route towards defusing the crisis, the daily reported.
"They believe an announcement by the prime minister on a timeline for him to dissolve parliament - regardless of how the [red shirts react] - might be the best way for him to hang on to his job," the report said.