(Reuters) - Anti-government protesters in Bahrain swarmed back into a symbolic square on Saturday, putting riot police to flight in a striking victory for their cause and confidently setting up camp for a protracted stay.

The government said it had opened a dialogue with opposition groups demanding reform as Crown Prince Salman bin Hamad al-Khalifa sought to ease tensions triggered by a wave of anti-government unrest sweeping the Middle East.

Crowds had approached Pearl Square in Manama from different directions, creating a standoff with riot police who had moved in earlier to replace troops withdrawn on royal orders.

Suddenly police raced to their buses, which drove away mounting kerbs in their haste to escape.

Emboldened protesters, cheering and waving national flags, ran to the center of the traffic circle, retaking it even before all police had left. The crowd waved fleeing policemen through.

"We don't fear death any more, let the army come and kill us to show the world what kind of savages they are," said Umm Mohammed, a teacher wearing a black abaya cloak.

The authorities are determined to prevent protesters from turning Pearl Square into a base like Cairo's Tahrir Square, the heart of a revolt that ousted Egypt's Hosni Mubarak.

On orders from the crown prince, troops and armoured vehicles earlier withdrew from the square, which they had taken over on Thursday after riot police staged a night-time attack on a sit-in by protesters, killing four people and wounding 231.

The crowds in Pearl Square soon swelled into the tens of thousands, celebrating a triumph for the mostly Shi'ite protesters who took to the streets on Monday, inspired by popular revolts that toppled leaders in Egypt and Tunisia.

Tents, removed two days ago by the army, were set up again along with makeshift medical stations to treat any wounded.

"We liberated a small part of Bahrain today. We will liberate all of Bahrain," a man in the square said.

Bahrain's 70 percent Shi'ite majority has long felt discriminated against in the Gulf Arab island, which is ruled by a Sunni Muslim dynasty and is a close U.S. and Saudi ally.

Shi'ites feel cut out of decision-making and complain of unfair treatment in access to state jobs and housing.

The government said it had opened a dialogue with opposition groups demanding reform. "A Bahrain process of dialogue has begun between the crown prince and political groups," the information affairs authority said in a message on Twitter. It gave no further details.

HOSPITAL OVERFLOWING

Sixty to 80 people were taken to Salmaniya hospital after being affected by teargas or hit by rubber bullets, a doctor said. He said the hospital was full and did not have enough oxygen to deal with the rush of casualties.

More than 60 people were in the hospital with wounds sustained on Friday when security forces fired on protesters as they headed to Pearl Square, then still in military hands.

Bahrain's crown prince called for a national day of mourning "for the sons we have lost," the state news agency reported.

The prince, who is also deputy supreme armed forces commander, called for calm, asking citizens to unite and cooperate with all political forces in the country.

"I stress, once more, that our duty is to preserve security and stability, to ensure that there is no discord and that the situation does not worsen," he said in a statement.

About the causes of the unrest, the crown prince, seen as a reformist, told Al Arabiya television: "Maybe, in summary, there is a feeling that some basic demands have not been met. We want to correct this situation and prevent its repetition."

After troops had been ordered off the streets, police were to keep order, but people power proved too strong in Pearl Square.

Some people kissed the ground in joy or started praying.

"We took this square in a peaceful manner. The Khalifa henchmen, they killed my friends here," a protester said.

On Friday, King Hamad bin Isa al-Khalifa offered a national dialogue with all parties to try to end the turmoil in which six people have been killed and hundreds wounded.

Hundreds of women in long black robes screamed "Down, down Khalifa" repeatedly outside Salmaniya hospital on Saturday.

WORD FROM OBAMA

President Barack Obama spoke to the king on Friday, condemning the violence and urging the government to show restraint and respect the rights of its people.

The crown prince's orders to withdraw the military from the streets were issued a few hours later.

"That's a very positive step," Jasim Hussain, a member of the main Shi'ite Wefaq bloc that quit parliament on Thursday, told Reuters. "They're trying to ease the tensions. I don't know whether it will be sufficient."

Wefaq earlier had rejected the king's dialogue offer, saying troops must be withdrawn first, among other conditions.

Another Wefaq lawmaker said the troop pullout was not enough by itself. "There's no difference if people are killed by the military or by the security forces," said Ibrahim Mattar.

"We hope to hear a clear message from the government that it will stop killing people who are protesting peacefully."

Mattar said the king must accept the concept of constitutional monarchy, as well as withdrawing the military.

"Then we can go for a temporary government of new faces that would not include the current interior or defense ministers."

He reiterated an opposition demand for the king to fire his uncle, Sheikh Khalifa bin Salman al-Khalifa, prime minister since Bahrain gained its independence in 1971.

Bahrain, a minor oil producer, has long been a military ally of the West. A naval base near Manama that hosts the U.S. Navy's Fifth Fleet helps the United States to project power across the Middle East and Central Asia, including Iraq and Afghanistan.

A fleet spokesman said there was no significant impact on operations and Jennifer Stride, spokeswoman for the U.S. naval base, said no evacuation of families was planned.

The United States is caught between the desire for stability in an ally seen as a bulwark against Iran and the need to uphold the people's right to express their grievances.

(Additional reporting by Cynthia Johnston; Writing by Alistair Lyon; Editing by Maria Golovnina and Mark Trevelyan)

www.reuters.com/article/2011/02/19/us-bahrain-square-idUSTRE71I32920110219

Feb. 19, 2011