* Rebels say have taken Konna from government troops
* Fighting could squash hopes of peace talks
* Rebel spokesman says fighting at other locations
By Tiemoko Diallo
BAMAKO, Jan 10 (Reuters) - Islamist rebels drove the Malian army out of the strategic northern town of Konna on Thursday, residents said, in the fiercest fighting since militant groups seized control of northern Mali nine months ago.
The fall of Konna, about 600 km (375 miles) northeast of the capital Bamako, was a major setback to government forces, which said earlier on Thursday they were making headway against the alliance of al Qaeda-linked rebels.
The U.N. Security Council convened emergency consultations in New York and agreed on a statement in which the members "express their grave concern over the reported military movements and attacks by terrorist and extremist groups in the north of Mali, in particular their capture of the city of Konna.
"This serious deterioration of the situation threatens even more the stability and integrity of Mali, and constitutes a direct threat to international peace and security," the council said after the meeting, which was requested by France. It also repeated calls for restoration of democracy in Mali.
French U.N. Ambassador Gerard Araud confirmed receipt of a request from the Malian government for military assistance and said the "nature of the response to the letter will be announced in Paris tomorrow."
U.S. Ambassador Susan Rice described the request for help from Mali, which was sent to the Security Council: "It wasn't specific, but it basically said, 'Help, France.'"
Western and regional governments are keen to dislodge the Islamists from a desert zone of northern Mali larger than France, which they captured in April, amid concerns they may use it as a launch pad to stage attacks.
Konna was the last buffer between the rebels and Mopti, about 50 km (30 miles) south, which is the main town in the region and is seen as the gateway to the country's north.
After hours of gun battles, heavily armed Islamist fighters paraded in triumph through Konna's centre, saying they would push on to take Mopti and its neighbouring town of Sevare, residents said.
"We took the barracks and we control all of the town of Konna," MUJWA rebel group spokesman Oumar Ould Hamaha told Reuters. "The soldiers fled, abandoning their heavy weapons and armoured vehicles."
News of the fall of Konna sowed panic in Mopti and Sevare, the latter the site of a large military barracks and airport. The towns lie at the crossroads between Mali's desert north and the greener, more populous south.
"We have received the order to evacuate," said the local head of a U.S. aid agency. "We have already pulled all our personnel and material out of Mopti."
While a U.N.-sanctioned intervention by African troops is unlikely before September, due to logistical constraints, world powers could decide to act sooner, a U.N. diplomat said.
"If the offensive continues, I think there will be an emergency decision by the international community," U.N. Special Envoy to the Sahel, Romano Prodi, said during a visit to Bamako on Thursday, without elaborating.
Former colonial power France has been among the most outspoken advocates of an African-led military intervention. Many in Mali's military have also been keen to launch a campaign to reverse their rout by the militants in April.
The U.N. Security Council has approved in principle the idea of an international military intervention in the north, though it has urged African nations to step up detailed planning in consultation with the United Nations.
An army official had earlier said that soldiers had retaken Douentza, a town about 120 km east of Konna, which has been in the hands of Islamists since September.
But residents and a rebel spokesman said Islamists had held their positions inside Douentza, exchanging fire with government troops stationed just outside.
The renewed fighting could derail hopes of a breakthrough at peace talks between the Malian government, the rebels and separatist Tuaregs, which were scheduled to start in Burkina Faso on Thursday, but have been postponed until Jan. 21.
Djibril Bassole, Burkina Faso's foreign minister and regional mediator in the crisis, on Thursday called on the parties to respect a ceasefire deal agreed on Dec. 4 and said the fighting posed a threat to talks.
"The climate of confidence has been greatly degraded, and I am very worried that these talks will not bear fruit," he told reporters in Burkina Faso's capital, Ouagadougou.
Ansar Dine, one of the main rebel factions, last week ended its ceasefire because of the plan for military intervention.
Once an example of democracy and development in turbulent West Africa, Mali was plunged into crisis by a March 2012 coup that allowed Tuareg rebels to seize the north, demanding an independent homeland. Their rebellion was hijacked by Islamists.
Bickering among Mali's political elite over a roadmap to end the post-coup transition is causing paralysis and damaging efforts to unite the country with elections to choose a replacement for a caretaker government.
Thousands of people took to the streets in Bamako on Wednesday calling for an end to the political crisis, blocking the city's two main bridges. The government responded on Thursday by shutting down schools in Bamako and Kati until further notice.