*

Yoon backs off in showdown with lawmakers

*

US expresses grave concern' about martial law

*

Protesters celebrate at parliament building

*

Government promises 'unlimited liquidity' to steady

markets

SEOUL, Dec 4 (Reuters) - South Korean lawmakers on

Wednesday called for the impeachment of President Yoon Suk Yeol

after he declared martial law only to reverse the move hours

later, triggering the biggest political crisis in decades in

Asia's fourth-largest economy.

The surprise declaration late on Tuesday ignited a standoff

with parliament which rejected his attempt to ban political

activity and censor the media, with lawmakers at one point using

fire extinguishers to prevent troops from entering parliament.

A coalition of lawmakers from opposition parties said they

planned to propose a bill to impeach Yoon on Wednesday which

should be voted within 72 hours.

"The parliament should focus on immediately suspending the

president's business to pass an impeachment bill soonest," Hwang

Un-ha, one of MPs in the coalition, told reporters.

Yoon told the nation in a TV address that martial law was

needed to defend the country from nuclear-armed North Korea and

pro-North anti-state forces, and protect its free constitutional

order, although he cited no specific threats.

Within hours, South Korea's parliament, with 190 of its 300

members present, unanimously passed a motion requiring martial

law be lifted, including all 18 members present from Yoon's

party. The president then rescinded the declaration.

Protesters outside the National Assembly parliament shouted

and clapped. "We won!" they chanted, and one demonstrator banged

on a drum.

South Korea's largest union coalition, the Korean

Confederation of Trade Unions, said thousands of its members

would strike until Yoon resigned and hold a rally later in the

day in downtown Seoul.

Several other protests are expected, including near the

National Assembly where thousands of people gathered late on

Tuesday to call for blocking Yoon's order and then demand his

arrest and resignation.

Some companies including Naver Corp and LG

Electronics Inc advised employees to work from home.

South Korean stocks opened down around 2% on

Wednesday, while the won steadied to trade around 1,418

to the dollar, having plunged to a two-year low.

The finance ministry promised to pour in money if needed to

prop up volatile financial markets, after Finance Minister Choi

Sang-mok and Bank of Korea Governor Rhee Chang-yong held

emergency meetings overnight.

"We will inject unlimited liquidity into stocks, bonds,

short-term money market as well as forex market for the time

being until they are fully normalised," the government said in a

statement.

The BOK was holding an extraordinary meeting starting at 9

a.m. (0000 GMT) on Wednesday.

DODGED A BULLET

After Yoon's announcement of martial law, South Korea's

military had said activities by parliament and political parties

would be banned, and that media and publishers would be under

the control of the martial law command.

Helmeted troops briefly tried to enter the parliament

building. Parliamentary aides were seen trying to push the

soldiers back by spraying fire extinguishers.

The main opposition Democratic Party called for Yoon, who

has been in office since 2022, to resign or face impeachment

over the martial law declaration, the first in South Korea since

1980.

"Even if martial law is lifted, he cannot avoid treason

charges. It was clearly revealed to the entire nation that

President Yoon could no longer run the country normally. He

should step down," senior DP member of parliament Park Chan-dae

said in a statement.

The National Assembly can impeach the president if more than

two-thirds of lawmakers vote for it. A trial is then held by the

constitutional court, which can confirm it with a vote by six of

the nine justices.

Yoon's party controls 108 seats in the 300-member

legislature.

"South Korea as a nation dodged a bullet, but President Yoon

may have shot himself in the foot," said Danny Russel, vice

president of the Asia Society Policy Institute think tank in the

United States.

The crisis in a country that has been a democracy since the

1980s, and is a U.S. ally and major Asian economy, caused

international alarm.

U.S. Secretary of State Antony Blinken said he welcomed

Yoon's decision to rescind the martial law declaration.

"We continue to expect political disagreements to be

resolved peacefully and in accordance with the rule of law,"

Blinken said in a statement.

Some 28,500 U.S. troops are stationed in South Korea to

guard against the nuclear-armed North.

Yoon, a career prosecutor, squeezed out a victory in the

tightest presidential election in South Korean history in 2022.

He rode a wave of discontent over economic policy, scandals and

gender wars, aiming to reshape the political future of Asia's

fourth-largest economy.

But he has been unpopular, with his support ratings hovering

at around 20% for months.

His People Power Party suffered a landslide defeat at a

parliamentary election in April this year, ceding control of the

unicameral assembly to opposition parties that captured nearly

two-thirds of the seats.

There have been more than a dozen instances of martial law

being declared since South Korea was established as a republic

in 1948.

In 1980, a group of military officers led by Chun Doo-hwan

forced then-President Choi Kyu-hah to proclaim martial law to

crush calls by the opposition, labour and students for the

restoration of democratic government.