Tunisia crisis | Battles rage around deposed President’s palace in Carthage

"The army has launched an assault on the palace in Carthage, where elements of the presidential guard have taken refuge," a senior Maltese diplomat told MaltaToday.

Eyewitnesses reported heavy gunfire in the area as residents have been told to stay indoors and keep away from windows.

Prime Minister Mohammed Ghannouchi meanwhile vowed there would be "zero tolerance" against anyone threatening the security of the country and said a new government for the North African state "may be" announced on Monday.

Ghannouchi held consultations with the leaders of the main opposition parties in Tunis on the formation of a national unity government to fill the power vacuum left by Ben Ali's abrupt departure after 23 years in power.

Ben Ali's ousting has sent shockwaves around the Arab world as he was the first Arab leader in recent history to be forced out by street protests.

Egyptian Foreign Minister Ahmed Abul Gheit downplayed prospects of the revolt spreading to other Arab countries, calling it "nonsense."

Tunisia has been in a state of chaos since Ben Ali's downfall and observers warned that change will be far from smooth because of the tightly-controlled system of power put in place by the former leader.

Tunisian radio reported the arrest of General Ali Seriati, the head of Ben Ali's presidential guard, on charges of plotting against the state and fomenting an armed insurrection against the new leadership.

Ben Ali's nephew, Kais Ben Ali, was also arrested along with 10 other people in the central town of Msaken - the Ben Ali family's ancestral home - for allegedly "shooting at random" from police cars.

Gunfights also broke out in the capital Tunis near the interior ministry and the headquarters of the PDP opposition party. The army said that two gunmen hiding in a building near the ministry had been shot dead by soldiers.

In the central town of Regueb meanwhile around 1,500 protesters held a peaceful rally in which they slammed the political talks in the capital saying the new government would not be truly democratic, a trade union leader said.

The army broke up the rally as protests are banned under the state of emergency declared in the country on Friday. Regueb was the scene of several violent protests in the run-up to the ouster of Ben Ali.

Some cafes had re-opened earlier on Sunday in the centre of Tunis -- the scene of violent clashes in the days leading up to Ben Ali's flight -- as security forces continued their lockdown of the city centre.

Long queues were seen outside the few bakeries and groceries open.

A French-German photographer from the EPA agency hit in the head by a tear gas canister during the protests in central Tunis on Friday was said to be "in a critical but stable condition," an official at the French consulate said.

The man, Lucas Mebrouk Dolega, 32, was earlier reported to have died.

Social network twitter reported that Imed Trabelsi, a nephew of Ben Ali, was stabbed and killed on Friday.