Military rule in Pakistan is producing a failing state that will endanger its own and its region's security unless democracy is restored through free and fair elections this year, a leading think-tank has said.

Observing that President Pervez Musharraf [Images] is determined to retain power at all costs, including rigging elections or proclaiming emergency rule, the International Crisis Group warned that it could portend disaster, nationally and regionally.

The ICG, which examined the most serious challenges to almost eight years of military rule and the implications of a growing civil society and political opposition that is demanding the military's withdrawal from politics, said the end of the military regime is now a matter of time.

"The manner in which elections are held, however, will determine if there is a peaceful, orderly democratic transition or a violent transition, with the attendant costs for a fragile state," Samina Ahmed, Crisis Group's South Asia Project Director has said.

The ICG noted that Musharraf and the military have maintained power by suppressing democratic forces and rigging national and local elections.

Empowerment of Islamist parties to counter moderate opposition has been significant and is now essential to the military government. "But the growing pro-democracy movement is leaving Musharraf with few choices, and the judiciary can no longer be counted on to endorse unconstitutional acts," it said.

"Another rigged or stolen election could possibly lead to a violent confrontation between the military and protestors," the Brussels-headquartered organisation has warned.

The think-tank said the US should understand its interests are best served by a democratically-governed Pakistan and not by military rule that excludes moderate parties and fans extremism.

"Its policy of relying solely on the military is largely responsible for growing anti-US sentiment among pro-democracy Pakistanis, who view the support for an authoritarian regime as hypocritical and unjustifiable," it said.

Backing a deeply unpopular military regime is no way to fight terrorism and neutralise religious extremism. "The international community should support its natural civilian allies, including Pakistan's most popular national parties, Benazir Bhutto's Pakistan People's Party and Nawaz Sharif's Muslim League," the ICG has said.

"Influential international actors should use their considerable influence to persuade the generals to give up power, offering political and material incentives if they do and sanctions if they choke democratic change".

The Pakistani government, it said, must hold free and fair parliamentary elections, before presidential elections, so that the new president is selected by a legitimate electoral college, ensure independence of the election commission, release political prisoners and allowing return of political leaders in exile.

"The choice in this election year is stark," Bob Templer, Crisis Group's Asia Program Director has said.

"Support for a return to genuine democracy and civilian rule, which offers the prospect of containing extremism, or continued support of a slide into a failing state that will export Islamic radicalism domestically, regionally and beyond," he said.