Hungarians attend a protest in front of the Parliament building in Budapest September 23, 2006. Tens of thousands of people rallied peacefully in Budapest on Saturday in the biggest demonstration so far against Hungarian Prime Minister Ferenc Gyurcsany over his admission that he lied to the electorate. [Reuters]

An estimated 30,000-40,000 demonstrators calling for Gyurcsany's resignation had gathered by 2100 (1900 GMT) outside the huge neo-Gothic parliament, where protests have been held for the past week.

But there was no repeat of the violence which marred earlier rallies and put riot police on full alert.

Gyurcsany was unmoved, saying he would stay in power and pledging to implement the painful tax rises and spending cuts which have caused his government's popularity to plummet to 25 percent in recent polls from 40 percent at April's election.

"I will continue on because I still have much to do here," Gyurcsany told the German magazine Focus in an interview published on Saturday.

Demonstrators carrying Hungarian flags and singing patriotic songs said they would stay the course in hoping they could eventually force out the 45-year-old millionaire Socialist.

"I am sure that we will succeed, if not now then in October or November. We must go on, that's the future and without that there is no future," said Geza, who described himself as a Budapest entrepreneur, but did not give his surname.

The turmoil in Budapest coincides with a political shake-up in Poland and the Czechs' failure to form a new government more than three months after an election, raising investors' concerns about political instability in central Europe.

The demonstrations have also widened the bitter division between the governing left and the rightist opposition, each accusing the other of fomenting violence to win ground ahead of local elections on October 1.

Some of the protesters were from far-right groups and there was concern about possible violence as local soccer team Ferencvaros, some of whose supporters are known for hooliganism and hatred of the government, were playing a home game.

But only a few, under the close watch of police, made their way to the demonstration after the game and caused no trouble.

Thousands of supporters of Fidesz, the main opposition party which cancelled its own rally because of fears of violence, were among those gathering in the square. Party leaders reiterated earlier calls for Gyurcsany to quit.

Fidesz Deputy President Pal Schmitt, in a brief speech outside parliament, asked the crowd to wear white clothes and white armbands to show they reject violence, and about half the crowd was wearing some white clothing.

Fidesz leader Viktor Orban told private InfoRadio that Gyurcsany had broken the law. "We are dealing with a chronic liar, that's clear," he said, referring to Gyurcsany's remarks, on a tape leaked to media, that his party had lied "in the morning and in the evening" to win re-election in April.

Despite the turmoil, Gyurcsany has won his party's backing for a package of budget cuts to rein in a huge deficit, which has surged to 10.1 percent of gross domestic product after four years of overspending.