SANAA (Reuters) - Thousands of Yemenis took to the streets of Sanaa Thursday to demand a change of government, inspired by the unrest that has ousted Tunisia’s leader and spread to Egypt this week.

Reuters witnesses estimated that around 16,000 Yemenis demonstrated in four parts of Sanaa in the largest rally since a wave of protests rocked Yemen last week, and protesters vowed to escalate the unrest unless their demands were met.

“The people want a change in president,” protesters shouted, holding signs that also demanded improvements to living conditions in Yemen, the Arab world’s poorest country.

President Ali Abdullah Saleh, a key ally of the United States in a war against a resurgent al Qaeda wing based in Yemen, has ruled this Arabian Peninsula state for over 30 years.

“If the (ruling) party doesn’t respond to our demands, we will escalate this until the president falls, just like what happened in Tunisia,” said protester Ayub Hassan.

A few dozen policemen with batons silently watched the protests, which ended calmly as demonstrators left to chew qat, a mild stimulant leaf widely consumed in Yemen in the afternoon.

Yemen’s ruling party ran a competing pro-government protest that gathered only a few hundred supporters, witnesses said.

Yemen, in the shadow of the world’s top oil exporter Saudi Arabia, is struggling with soaring unemployment and dwindling oil and water reserves. Almost half its 23 million people live on $2 a day or less, and a third suffer from chronic hunger.

Mohammed al-Sharfy, a student protester at the Sanaa University rally of around 10,000 protesters, said economic disparities needed to be addressed.

“I am here to say no to corruption. We need to end this trend of graduating thousands of university students each year with no jobs, while officials and their kids take everything.”

TUNISIA Fueled PROTESTS

Current unrest appears to be partly a reaction to a proposal floated late last year by members of Saleh’s ruling party, the General People’s Congress, to end presidential term limits that would require Saleh to step down when his term ends in 2013.

Yemen’s opposition coalition tried to rally against the idea in December, but failed to bring large numbers to the street. The wider support for recent protests is apparently influenced by Tunisia’s successful revolt.

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“They tried before Tunisia to get people out and couldn’t, so their ability to get a good showing now has been deeply influenced by events in Tunisia,” Yemeni analyst Abdulghani al-Iryani said.

Saleh’s party backtracked last week in an effort to calm discontent, floating the idea of a new amendment that would limit a president to two terms of either five or seven years.

Opposition leaders say that proposal is not enough, as it is seen as allowing Saleh to run for two more terms.

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“We will continue protesting until the ruling party backs off its amendment proposals and initiates dialogue with all political parties, including the (separatist) Southern Movement, and ending corruption,” said Fakher Yahya, a protest organizer.

Yemen is trying to quell secessionist rebellion in its south and cement a truce with northern Shi’ite rebels.

Saleh also promised this week to raise salaries of civil servants and military personnel by at least $47 dollars a month.

Opposition MP Abdul Malik al-Qasous said people wanted political and economic reforms.

“The opportunity for reform is still available, and we fear the situation will reach a point where people will not hear their ruler when he says, ‘I have understood you!’”