SANAA, YEMEN - Heavy gunfire was reported in Tripoli Wednesday, as anti-government demonstrators clashed with loyalists of Libyan leader Moammar Gaddafi.

The longtime dictator is vowing to "fight until the last drop of my blood" to maintain his 41-year hold on power, and has called on supporters to reclaim control after a week of rebellion that has left his government's authority in tatters.

Residents in the eastern half of the country, where demonstrators have seized control, raised the flags of the old monarchy that was ousted when Gaddafi seized power, the Associated Press reported.

But the mood in Tripoli was bleak, according to the wire service. Residents were afraid to leave their houses, saying pro-Gaddafi forces were opening fire randomly in the streets. A ferry chartered by the U.S. government was preparing to evacuate American citizens to to Malta.

Facing a violent popular revolt backed by high-level defections, Gaddafi cast an ominous tone in his 70-minute address on Tuesday, referring to China's forceful response to the 1989 Tiananmen Square protests to suggest that his regime, too, would use as much force as necessary to stay in power.

"I will not leave the country," Gaddafi declared in the rambling televised speech, delivered from the remains of a presidential palace destroyed in a 1986 U.S. air raid. "I will die as a martyr at the end." He showed no remorse for attacks launched by his loyalists against his citizens, vowing instead to "cleanse Libya house by house."

The violence engulfing Libya is already the worst in more than a month of unrest that has toppled regimes in Tunisia and Egypt as it has spread across North Africa and the Middle East. Libya's military and security forces have used jets and helicopters to fight back, roiling world oil and stock markets with the prospect of disruptions in a major oil supplier.

The United States and the United Nations condemned the Libyan leader's use of military force against his citizens, with the Obama administration employing its strongest language yet to condemn the 68-year-old.

French President Nicolas Sarkozy on Wednesday said the European Union should impose sanctions on Libya, in effect cutting all economic and business ties with the North African nation.

"The continuing brutal and bloody repression against the Libyan civilian population is revolting," Sarkozy said, according to news reports. "The international community cannot remain a spectator to these massive violations of human rights."

But some long-standing allies came to Gaddafi's defense, with Nicaraguan leader Daniel Ortega phoning to help counsel him through his country's "moment of tension.''

With the Internet and other communications limited and outside journalists and observers denied access, information came mostly through secondhand reports from residents reached by phone or from people leaving Libya across its eastern border with Egypt.