Opposition digs in as Panamanian government seizes offensive. Opponents turn up political heat and wait for internal collapse

As another wave of political turmoil continues to build here, Panama's military-led government has seized the offensive from its growing opposition. This week, Gen. Manuel Antonio Noriega, the country's de facto leader, shut down three opposition newspapers and arrested the ex-chief of staff whose charges of military corruption and conspiracies first sparked public protest seven weeks ago.

And with daily demonstrations, more like fiestas flowing with free drinks and music, thousands of government supporters have taken back the streets. The government-orchestrated festivities are expected to reach a peak today, when Panamanians commemorate the sixth anniversary of the death of revered military chief Omar Torrijos Herrara, who ruled from 1968 to 1981.

Organizers of the 48-hour business strike that virtually shut down the country earlier this week claimed the government is responding out of fear. At press time, the members of the ``Civic Crusade'' were planning to continue their protests Thursday afternoon in conjunction with the funeral of a university student killed last weekend by a national guardsman.

General Noriega's forceful offensive has made opposition leaders determined to dig in for an extended series of political confrontations. ``It's a battle, and unfortunately it is going to get worse before it gets better,'' says Ra'ul Mendez, vice-president of the Chamber of Commerce. ``We never expected that he [Noriega] would leave with a 48-hour strike. ... We don't think he will go unless someone from the inside kicks him out.''

Many diplomats share the view that the opposition can only turn up the political and economic heat and wait for an internal collapse.

``The man is very entrenched,'' says a Western political analyst, referring to Noriega. ``He won't leave until his peer group [the 19 colonels who make up Noriega's staff] tells him to pack his bags. The opposition does not have the power to make the changes, and they know that.''

The opposition stresses that a stagnated economy will lead to instability - and the absolute necessity for change.

Within the government, there is evidence of growing concern over the economy, especially about the plunging confidence of international investors who have made Panama the banking captial of Latin America. But on Wednesday, a banking source said, the government scraped up enough money to pay interest on its nearly $5 billion foreign debt.

Economic disaster, in fact, may prove more threatening to the business-led opposition than to Noriega, political analysts here say.

Noriega has shown some political acumen, analysts say. Last week, he turned over three state bodies to civilians. On Tuesday, a new hospital was approved for one of the poorest barrios in the city. And on Wednesday, many of the government's 150,000 employees - almost a quarter of the active work force - were given the day off to attend a pro-government demonstration. Their rowdy block party prevented the opposition from carrying out its daily noon protest.

Panama University was shut down for the remainder of the week on Wednesday morning, after a diminishing student protest was squelched by riot police using tear gas and birdshot. The student protest stemmed from the killing of a colleague by national guardsman last weekend.

Accounts of the shooting - the first confirmed death in seven weeks of unrest - say the student was with friends at a carnival when one shouted, ``Down with Noriega.'' A passing patrol opened fire.

At press time, there was no official word on where ex-chief of staff, Col. Roberto D'iaz Herrera, was being held after the Army took him and 44 others from his home on Monday. He has been charged with treason.