Embattled Gloria Macapagal Arroyo defied mounting calls for her to step down as president of the Philippines, saying Friday she will appoint a new cabinet in the next few days ''to get our economy moving.''

Arroyo, due to serve until 2010, is facing the toughest test of her four years as leader over allegations that she tried to influence the vote-count in last year's presidential election and that family members took kickbacks from illegal gambling.

All eyes are on a weekend meeting of the Catholic Bishops Conference of the Philippines. Withdrawal of support by the senior clergymen would almost certainly be a lethal blow.

They already appear divided in their support for Arroyo, and church sources said Friday the bishops were leaning towards joining the chorus of calls for her to resign.

``There is an understanding we have to make a statement on the president,'' said Bishop Antonio Ledesma.

The bishops, holding their twice-yearly meeting, are due to issue a statement on this afternoon.

A consensus was building for the bishops to ask the president to make a personal sacrifice to end the political crisis, a source in the conference said.

In Manila, the military and police are on the highest level of alert. General Efren Abu, the military's chief of staff, ordered troops not to intervene in the political crisis at a hastily called meeting of all senior commanders.

On Friday, members of Arroyo's sacked cabinet, together with iconic former president Corazon Aquino and an influential business group, joined a chorus calling on her to step down.

But voices of support came from Defense Secretary Avelino Cruz, Justice Secretary Raul Gonzales, Economic Planning Secretary Romulo Neri and 13 other members of the cabinet.

``I was duly elected to uphold the constitution,'' Arroyo said on government radio before she met a group of political allies, including former president Fidel Ramos.

``I say take your grievances to Congress where I am very willing to submit to due process.''

Ramos has proposed a change in the two-house congressional system that would see Arroyo stay on as caretaker president until fresh elections for a single parliament in May 2006.

Arroyo, who said Thursday the political system requires fundamental change, has made no secret of her own desire to move to a parliamentary system to speed up passage of laws.

Some analysts said financial markets would have liked Arroyo's main economic managers to stay on to steer reforms aimed at improving weak revenue collection and cutting debt of nearly US$70 billion (HK$546 billion).

The peso neared its historic low against the dollar before recovering to close at 56.10. Bonds slumped but stocks rose, with analysts expecting any leadership change to be peaceful.

Under the constitution, Vice President Noli de Castro would assume the presidency if Arroyo resigned.

``An Arroyo resignation would be unlikely to settle matters as Vice President de Castro has questionable support,'' said David Fernandez, research head for Asian emerging markets at JPMorgan.

About 1,500 anti-Arroyo protesters gathered in Manila's business district, but there has been no sign of the rage behind ''people power'' uprisings that ousted dictator Ferdinand Marcos in 1986 and president Joseph Estrada in 2001.

REUTERS