Wednesday August 20, 2008  12:16 pm

AP Photo XPR109, XPR122< ContentType:Spot Development; ContentElement:FullStory; Breaking:True;

By JIM GOMEZ

Associated Press Writer

KAUSWAGAN, Philippines (AP) - The beleaguered Philippine peace process was thrown into disarray Wednesday, with the government saying a proposed deal with Muslim rebels must be renegotiated after the guerrillas shot or hacked 37 people to death.

The announcement came as the peace process with the Moro Islamic Liberation Front already appeared to be unraveling after Monday's rampage, which also led 44,000 people to flee their homes for evacuation centers in the troubled south.

Jesus Dureza, the president's press secretary, said the government was concerned that the rebel leadership may not be able to control all their forces and such attacks could be repeated.

Solicitor General Agnes Devanadera told the Supreme Court ``circumstances have changed'' since the aborted signing of the Malaysia-brokered accord earlier this month, referring to the rebel attacks and an ambush Sunday that killed four soldiers and four government militiamen.

She asked that challenges to the accord be thrown out because the deal ``in its present form, must undergo a thorough review.''

The government will pursue ``further negotiations'' with the rebels to address issues raised by opponents of the deal. She said the government will also conduct further consultations with those who would be affected by an expanded Muslim autonomous region in the south.

But chief rebel negotiator Mohagher Iqbal ruled out fresh negotiations, saying both sides had initialed a memorandum. He called resuming talks ``like opening a can of worms.''

``It's going to be a deadlock,'' Iqbal told The Associated Press by phone. ``They would call for a renegotiation, and we will not renegotiate. We have other options.''

He refused to elaborate but said an escalation in fighting was possible. Extra troops and police have been sent into the area, and a new batch of police special action forces arrived Wednesday.

Philippine troops already have been walking a tightrope, with orders to pursue Muslim rebels blamed for the recent attacks without jeopardizing the peace process.

The two-track policy was outlined during a frustration-packed town hall meeting where Defense Secretary Gilbert Teodoro heard local officials and residents angrily demand all-out war against the rebels.

``It might be a very popular policy here to have an all-out eradication,'' Teodoro said. ``My policy is to secure and defend, in accordance with the law, innocent civilians and to preserve the integrity of the republic, but not by eradicating people like they are mice.''

Underscoring the unstable situation, about 30 rebels attacked an army patrol base Wednesday at Shariff Aguak in Maguindanao province, wounding a lieutenant, regional military spokesman Maj. Armand Rico said, adding that the military responded with mortar and howitzer fire.

The rebel leadership has denied ordering Monday's attacks in five coastal towns, saying they were launched by local commanders frustrated at delays to finalizing the peace agreement.

Interior Secretary Ronaldo Puno announced $113,000 arrest bounties on two rebel commanders - Abdullah Macapaar, also known as Bravo, who led the latest attacks, and Ameril Umbra Kato, who led the occupation of predominantly Christian villages in the south last week.

In a radio interview Wednesday, Bravo said his group had ``nothing to do with'' the attacks. But he complained that his fighters are running out of patience with the government peace process.

``If the government declares an all-out war, we will also declare an all-out war in Mindanao,'' he said. ``We are ready to kill and be killed. The patience of Muslims has run out.''

In a statement on their Web site, the Moro Islamic Liberation Front warned the government against launching an all-out offensive, saying it would be ``the most serious blunder that this sitting regime could commit.''

The 11,000-strong rebels have been fighting for Muslim self-rule in the predominantly Roman Catholic nation for decades.

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Associated Press writers Hrvoje Hranjski, Oliver Teves and Teresa Cerojano contributed to this report.