ANTANANARIVO (Reuters) - Madagascan security forces seized control of a military camp on Thursday, quashing an attempted mutiny by a small group of military police.

Two government soldiers were killed and three civilians wounded, a military police commander said, in the latest escalation of a political crisis that has rocked the Indian Ocean island since early last year.

Political analysts say there is mounting frustration within some elements of the armed forces at President Andry Rajoelina’s failure to end the economically crippling turmoil, and they warn the situation could deteriorate further.

Security forces overran the barracks when negotiations with the dissident military police inside broke down and a new gun battle erupted. The renegade troops had retreated to the camp following an earlier gun battle in the capital Antananarivo.

“They have fled,” regional military police commander Colonel Richard told reporters. Earlier he had warned of a “bloodbath” if the renegade troops refused talks and there were no immediate details of casualties among the mutineers.

Military officials said 21 renegade troops from the National Gendarmes Intervention Force (FIGN) were involved in the clashes.

Several hundred anti-government protesters and a number of church leaders aligned with former president Marc Ravalomanana rallied behind the mutinying troops.

A combination of angry military personnel and disenfranchised church leaders and civilians has in the past brought down governments in Madagascar, political risk consultant Lydie Boka said.

“There seems to be a combination of factors that could quickly lead to a deterioration of the situation unless a solution is found quickly, but it would have to be accepted by all sides,” Boka told Reuters.

“In the short run maybe (they) can be calmed down but it is not sustainable over the medium term.”

INJUSTICES AND ARRESTS

Political instability has convulsed the world’s fourth largest island, eyed increasingly by foreign investors for its oil and mineral resources, since Rajoelina grabbed power with military backing in March last year.

Earlier this month, Madagascar’s army chief rowed back on an ultimatum given to Rajoelina to find a solution to the leadership crisis after the president pledged to form a “neutral” government.

Some analysts say the country’s political leaders are manipulating the deep rifts within the armed forces.

A military police officer leading the mutiny, Colonel Raymond Andrianjafy, said “injustices and arrests” had prevailed under Rajoelina’s leadership.

“The truth will never die and we are prepared to go all the way and take hold of our responsibilities,” Andrianjafy told reporters late on Wednesday.

The opposition has dismissed the former disc jockey’s talk of neutrality and said a unilaterally organised referendum in August and a presidential ballot slated for November would lack transparency and legitimacy.

In the eyes of many people on the island, Rajoelina, Africa’s youngest leader, has failed to deliver on his promise to improve living standards and strengthen civil liberties.

Former president Ravalomanana opened Madagascar’s doors to major foreign companies, and overseas investment surged to around $1.47 billion to 2008 from $86 million in 2005. Inflows have collapsed, but by how much is not clear.