The rebel-held Libyan city closest to Tripoli was preparing for battle with government troops today.

Tanks and anti-aircraft weapons were deployed in Zawiya ready for an expected attack by forces loyal to Muammar Gaddafi.

The regime, eager to reinforce its view that Libya was calm and under its control, took visiting journalists to Zawiya, 30 miles west of the Tripoli yesterday.

But the tour merely confirmed that rebels controlled the centre of the city of 200,000 people.

The charred hulks of cars littered the city, many buildings were pockmarked by bullets, and most streets were blocked by felled palm trees or metal barricades.

Police stations and government offices have been torched, and anti-Gaddafi graffiti - labelling him a "mass murderer" - was everywhere. In the main square, an effigy of the leader hung from a lamp post with the words "Execute Gaddafi" on its chest.

The mood was generally upbeat although the anticipation of a renewed attempt to retake the city was causing some anxiety.

"We are all wanted," said one man who did not want to give his name for fear of reprisals. "Zawiya in our hands is a direct threat to Tripoli."

On Zawiya's outskirts were pro-Gaddafi forces, also backed by tanks and anti-aircraft guns.

About 20 miles west of Zawiya, 3,000 pro-Gaddafi demonstrators gathered on the coastal road, chanting slogans in support of the Libyan leader.

Rebels and defecting army forces largely consolidated control of Zawiya on Thursday, after an army unit loyal to Gaddafi opened fire on a mosque where residents - some armed with hunting rifles - had been holding a sit-in.

The square has become the burial site of six of 11 rebels killed by pro-Gaddafi forces who failed to retake the town that day.

At least six checkpoints controlled by troops loyal to Gaddafi stood on the road from Tripoli to Zawiya. Each was reinforced by at least one tank.

In Libya's second-largest city of Benghazi, politicians are setting up a council to run day-to-day affairs in the eastern half of the country under their control. It was seen as the first attempt to create a leadership body that could eventually form an alternative to the Gaddafi government.

Gaddafi vowed to stay in power, telling Serbia's private Pink TV in a telephone interview that "the Libyan people are still behind me."

"Currently in Libya there are no incidents, now everything is quiet," he said.

Human rights groups and European officials have put the death toll since unrest began in Libya nearly two weeks ago at hundreds - perhaps thousands - although it has been virtually impossible to verify the numbers.

Gaddafi loyalists remain in control of Tripoli, where most stores were closed and long queues formed outside the few banks open for business.

Libya's Central Bank said in a statement on state TV that payments will be made for the next few days. "Give banks a chance to secure the needed liquidity in its branches at the suitable time," it said.

One resident said Tripoli's calm may be deceptive.

"The situation is being constructed to look natural, but it is not," said a 40-year-old Tripoli businessman who did not want to be named.

"People are scared and they are waiting for the fall of the regime. People are scared to go out or to gather because some areas have been taken over by armed groups loyal to the regime."

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