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Libyan rebel fighters react as they search for snipers while fighting for the final push to flush out Moammar Gadhafi's forces in Abu Slim area in Tripoli August 25, 2011.ZOHRA BENSEMRA/REUTERS

Rebel leaders moved into Tripoli and began setting up a new government Thursday, saying they would push ahead with the task of rebuilding the country regardless of the fact that Colonel Moammar Gadhafi remains at large and his men continue to fight the revolution.

Ali Tarhouni, deputy head of the rebel cabinet, strode into a downtown hotel surrounded by guards and supporters who announced his arrival with a chorus of "God is great!" His presence, along with that of high-ranking rebel officials responsible for health, military, police, justice, development and communications, served as a brazen display of confidence in a city still rattled by gunfire and explosions.

Battles raged only a few kilometres away while Mr. Tarhouni and his entourage settled down for an evening meal of lamb, rice and stew, discussing a statement intended to mark a new chapter in their transition to democracy.

The current reality of Tripoli is shortages and disorder, with piles of stinking garbage in the streets and plumes of smoke hanging over the skyline. The transitional leaders face high expectations that all of this will improve.

Some rebels see themselves as Robin Hood figures, plundering the assets of the regime and returning them to the people – some literally believe that funds in Col. Gadhafi's frozen bank accounts, $1.5-billion of which was released at the UN Thursday, will be distributed to each household. It seems very unlikely that the new leadership will spend its money that way, however, and Mr. Tarhouni's team will face immediate challenges just returning the quality of life in the capital to its pre-revolutionary standard.

At an evening news conference with journalists in a grand hotel ballroom, under crystal chandeliers, Mr. Tarhouni and his group of men in suits tried to show that Libya is getting back to business. Transitional officials and rebel soldiers stood solemnly for an airing of the rebel anthem. Mr. Tarhouni emphasized that the return to normalcy should not be distracted by the hunt for Col. Gadhafi.

"What is the importance of catching Gadhafi, for a new beginning, for free Libya?" Mr. Tarhouni said. "He's hiding in bunkers like a rat, moving from one gutter to another."

Even as NATO air patrols continued to roar overhead, and surveillance assets were reportedly tasked with the search for Col. Gadhafi, the rebels have started to shift their diplomatic efforts away from the West and toward audiences closer to home. Mr. Tarhouni served as a lecturer at the University of Washington for more than two decades and speaks flawless English, but he proved very reluctant to say anything in English to the foreign journalists. When listing the countries that assisted the rebels, he mentioned his U.S. and European partners but also lavished praise on Tunisia and Turkey – countries that could play an important role in Libya's economic recovery.

Still, Mr. Tarhouni also reassured the West that foreign interests will be safeguarded.

"We will protect all foreign nationals and their property," he said. "I also promise that we will accept all alliances with other countries from around the world during this transition, until the Libyan people choose a council that represents the Libyan people. Then, the Libyan people can choose."

In the meantime, the deputy chief executive said that pro-Gadhafi loyalists should put down their weapons without fear of retribution – and rebel gunmen should do likewise, returning to their ordinary jobs.

"We have gotten rid of the despot," Mr. Tarhouni said.

On the streets, rebel fighters seemed less convinced. Bleeding men flooded into emergency rooms as fighting continued in half a dozen neighbourhoods of the city. Salem Miloud Rabti, 43, an auto mechanic and father of four children, said he would give up his Kalashnikov rifle to local authorities when the last pocket of pro-Gadhafi resistance was crushed.

"I will put down this gun when we have a free Libya, a democratic Libya, when we live free and die free," Mr. Rabti said. "We must clear this country of rats."

For the moment, people on the streets appear surprisingly welcoming of the bands of gunmen – often from outside the city – who roar around in pickup trucks, firing randomly in the air.

Jamal Shabo, 55, a businessman, watched a rebel brigade from Misrata parading into Martyr's Square, littering the pavement with bullet casings as they blasted celebratory gunfire into the sunset.

"We will invite them for iftar," he said, referring to the traditional evening meal during the holy month of Ramadan. "They are welcome in our homes, always. This is what has happened to us: We are all together now."

His 11-year-old son, Ali, flinched as a gunner unleashed a torrent of fire from a heavy gun, making such a powerful sound that it set off car alarms. After taking a moment to recover, however, he offered in English: "I am free." That statement appeared to stretch his limited vocabulary, and his father offered this as an example of what will change in the coming years.

"In the future we will teach English in all of our schools," he said.

Like many others on the street, Mufta Al-Senussi, 53, seemed skeptical about whether the rebel leadership had actually arrived; when informed by The Globe and Mail that the rumours were correct, he suggested they should focus their attention on security and health concerns.

"Those should be the first things," he said, "so people don't live in fear."

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