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By EDUARDO GALLARDO Associated Press Writer

SANTIAGO, Chile (AP) -- The arrest of Chile's former dictator is rattling this country's decade-old transition to democracy, reviving political confrontations despite government efforts to ease divisions that triggered violence in the past.

President Eduardo Frei urged his nation Wednesday to shun confrontation and remain calm while authorities in Europe sort out the legality of the arrest Friday of Gen. Augusto Pinochet. The former dictator remained sequestered at the London clinic where police arrested him Friday at a Spanish magistrate's behest.

The Spanish judge is seeking Pinochet's extradition on charges of genocide, murder and torture during his 17-year military rule of the South American country.

``I want to make an appeal to the country to maintain calm and serenity and to not polarize the situation,'' Frei said.

His words echo the concerns of Chileans who fear that Pinochet's arrest would restore an atmosphere of radical political confrontation that characterized Chile in the 1970s and '80s. Already, Pinochet's angry rightist supporters are squaring off against the jubilant left, whose standard-bearer, Marxist leader Salvador Allende, was deposed by Pinochet in a 1973 coup.

Every day since news of the arrest reached Chile, foes and supporters of the 82-year-old former dictator have taken to the streets to protest or celebrate, with the British and Spanish embassies frequent targets.

Though those demonstrations have ebbed somewhat, the government said Wednesday it would not allow new protests. Some small and scattered peaceful protests, however, were reported.

Separately, the Roman Catholic Church said the Pinochet episode may harm ``the difficult efforts toward reconciliation among Chileans.'' Similar concerns were expressed abroad.

Carol Graham, a senior fellow at Brookings Institution in Washington, said that Chile's transition to democracy after Pinochet's reign had required a long political search for a ``difficult consensus.''

``I see this as a very dangerous tinkering with that consensus.''

Pinochet was arrested as he recovered from back surgery, and reports from his family and Chilean rightist politicians claim his condition has deteriorated to a worrisome point.

The Spanish judge wants to question him on human rights abuses during his 1973-90 dictatorship, particularly regarding the deaths of Spanish citizens.

Britain rejected the Chilean government claim that Pinochet, in his capacity as a senator-for-life, has diplomatic immunity. Chile filed a formal protest with Britain claiming that immunity had been violated.

Chile said a government decree before the visit established that Pinochet was traveling on an unspecified ``official mission'' and that, when he elected surgery, the mission was extended through Nov. 5.

Concerns about the political effect dominated reaction here.

``We are returning to situations of the past, as a result of wounds in our society that have not healed,'' said Ricardo Lagos, the socialist front-runner in the race for the presidential nomination of Chile's center-left coalition.

His main rival for the nomination, Christian Democratic Sen. Andres Zaldivar, declared: ``This is the most difficult situation faced by our democratic transition in 10 years.''

The situation appeared complex for the pro-government coalition, which openly split on the issue and on the government's decision to seek Pinochet's release.

The leftist side of the coalition celebrated, while the centrist Christian Democrats supported the government's bid to win his freedom.

The unprecedented episode showed that Pinochet and his legacy remain in the center of Chilean politics, but initial fears that the finely calibrated political balance would be severely upset are dissipating.

Sen. Gabriel Valdes noted that statements by the military supporting Pinochet ``are understandable, but were remarkably moderate.''

Meanwhile in London, former Prime Minister Margaret Thatcher, who entertained Pinochet at her London home two weeks before his arrest, said Pinochet was a good friend to Britain during the 1982 Falklands War against Argentina and must be allowed to return to his country ``forthwith.''

In a letter to The Times newspaper on Thursday, Thatcher noted the irony of a planned visit to Britain next week by Argentina's leader Carlos Menem.

``It would be disgraceful to preach reconciliation with one, while maintaining under arrest someone who, during that same conflict, did so much to save so many British lives.''

She said Pinochet's fate was an internal matter for Chile and that Spain or Britain should not interfere with Chile's transition to democracy.

AP-NY-10-21-98 2155EDT

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