It also announced that Angelo de la Cruz is safe and not in danger of being killed.

It was a statement that seemed designed to keep everyone guessing.

Foreign Secretary Delia Albert suggested in a statement released by the presidential palace that eight of the Philippines' contingent of 51 soldiers and police had left the country.

"The Foreign Affairs Ministry is coordinating the pull-out of the humanitarian contingent with the Ministry of National Defence. As of today, our headcount is down from 51 to 43," she said.

She did not specify whether the move amounted to compliance with the kidnappers' demands that the entire Filipino contingent leave Iraq by July 20, a month earlier than scheduled.

Even so, Washington was quick to label the announcement as a worrisome signal, saying any pullout would send a wrong message to the Iraqi kidnappers.

And the US promptly sent some signals of its own.

Mr Richard Boucher, US State Department spokesperson, said: "We certainly noted the remarks and are disappointed to see remarks like this at a time when Iraq is fighting for stability and peace."

Manila is performing a delicate balancing act.

It wants to maintain its image as a stalwart ally in the US-led coalition in Iraq.

But while giving in to the demands of the kidnappers may cast doubts on Manila's commitment, the government is facing nationwide calls for it to make all efforts to save the life of de la Cruz.

And while coalition partners are urging the Philippine government to display fortitude, many Filipinos want it to choose compassion for their fellow citizen and his family.

Francisco de la Cruz, brother of hostage, said: "We will be very happy if the soldiers are withdrawn and our brother released."

Chat Dimaano, leader of Migrant Workers' Organisation, said: "We still need to see a complete withdrawal of our soldiers from Iraq and we need to see Angelo alive and back here with his family."

Despite the desperate calls, Philippines officials have refused to clearly show their hand.

With no clues as to what they are doing, all anyone knows for sure is that the government is still negotiating.

CAR BOMB

The suspected car bomb was the first big guerrilla attack in Baghdad since an interim Iraqi government took over from US-led occupiers on June 28.

Deafened passersby and a man with blood oozing from his chest staggered from the site of the explosion.

"My God, my God," screamed one panicked woman among the scores of workers, visitors and journalists lining up for security checks to get into the US-defended area.

The blast occurred hours after news that Islamist militants led by Abu Musab al-Zarqawi had killed one of two Bulgarian truck drivers held hostage in Iraq. They vowed to kill the second within 24 hours unless US-led forces freed prisoners.

Bulgaria said it would not pull its 470 troops out of Iraq despite the killing of the driver and the plight of the other.

Arabic Al Jazeera television said it would not air a video tape from Zarqawi's Tawheed and Jihad group showing the beheading of the Bulgarian. But it showed him in a blindfold and an orange jumpsuit kneeling before three masked men.

Bulgarian media identified the beheaded hostage as Georgi Lazov, 30. He was kidnapped with Ivailo Kepov, 32, after they had delivered cars in the northern city of Mosul on June 27.

Militants led by Zarqawi, a Jordanian who is Washington's top target in Iraq and a suspected al Qaeda ally, have already beheaded an American and a South Korean.

(Reuters, AP, CNA)