Slobodan Lekic, Jakarta – The Indonesian government on Friday suspended a new law giving the armed forces expanded emergency powers, a day after its passage sparked one of the most serious protests to hit the capital since former President Suharto was forced from power.

The policy reversal was seen as a blow to the powerful army commander, Gen. Wiranto, who sponsored the bill. It also will further erode the prestige of President B.J. Habibie, who is running for re-election after succeeding Suharto in May 1998.

Habibie's chances have been dimmed by dissatisfaction with his handling of the referendum on East Timor independence and by a bank scandal involving his closest associates. "Half of the people do not understand the contents of the bill," complained Maj. Gen. Sudrajat, the spokesman who made the announcement on behalf of the Cabinet. "Because of that, the government has decided to suspend the security law." The statement did not immediately quell running battles in Jakarta between student-led protesters and riot police backed by marines.

Hospital and police officials said three demonstrators and one officer were killed in two days of rioting. More than 100 people were injured and police said 39 protesters were arrested.

During much of Friday, demonstrators blocked the capital's main thoroughfare, Sudirman Avenue, pelting police with stones and gasoline bombs. They tore out traffic signs and decorative pillars to create makeshift barricades.

Police responded with plastic bullets and tear gas, but the demonstrators quickly regrouped after each police charge.

Indonesia's stock exchange and currency market closed early because of the violence. The national currency, the rupiah, continued to slide on fears of political instability and ended six percent lower than last week. Shops and malls throughout the city also closed early.

Opposition leaders quickly joined the students in rejecting the new law. Megawati Sukarnoputri, the front-runner to become Indonesia's next president, and Matori Abdul Djalil, leader of the National Awakening Party, demanded that the law not be applied until the new parliament convenes next week and officially revokes it.

"The nation is again shedding tears over the victims among the flower of its youth because of the action by the security apparatus," they said in a joint statement. "The students' peaceful protests were met with violence." At Jakarta's Atma Jaya Catholic University, the scene of a massive police raid just before dawn Friday, students taunted a cordon of officers resting under shade trees opposite the campus.

"Be afraid, be afraid," yelled a student who gave his name as Andes. "We now have weapons – sharp ones too."