Flags and hope on Libya's uneasy anniversary TRIPOLI (Reuters) - Flags flew on Martyrs Square in Tripoli and crowds across Libya gave voice on Friday to joy at being free of Muammar Gaddafi, as the anniversary of their revolt offered brief respite from fears that it has brought them only chaotic paralysis. In Benghazi, cradle of last year's "February 17 Revolution," and in the capital, which fell to a motley array of Western-backed rebels six months later, edgy armed guards ringed central squares, though there was none of the sporadic gunplay which has soured the peace that followed Gaddafi's killing on October 20. It was a sign of some progress in dampening the public exuberance of the rival bands of militia fighters who roam the streets of Tripoli that it was honking car horns rather than the occasional burst of celebratory fire which provided the audible backdrop to public and private festivities throughout the day. But as it struggles to prepare a free election in June while hundreds of armed groups of varying local, tribal or religious affiliation jockey for a slice of the oil-rich desert state, the interim government has disappointed Libyans and raised doubts it can even hold the sprawling country of six million together. For a day, however, it was time to party and renew the hopes for a better future for themselves and their children, even if the government was holding back on official celebrations. "Despite the problems that remain in the country, this is an amazing day and we want to celebrate," said Sarah, a 22-year-old engineering student out with friends among thousands in central Tripoli, a city of about two million people. Families out for the day flew flags and listened to a band play the national anthem on Martyrs Square - it was Green Square in the days when Gaddafi would address crowds there for hours. Fireworks popped, small lanterns floated in the Tripoli skyline and ships in the harbor blew foghorns. Abdelwafi Mohammed, 25, a recent university graduate beamed as he pointed to those around him: "I feel like all the Libyans feel happiness and joy. We don't have any fears. Our spirits are high. This is a blow to the Gaddafi loyalists. Enmities lingering after 42 years of rule by Gaddafi and a corrupt family coterie fester. In grim, makeshift jails, angry militiamen hold, and sometimes torture, rivals whom they accuse of pro-Gaddafi sympathies - though there is little sign of any loyalist movement seeking to restore Gaddafi's kin to power. International human rights groups have urged the National Transitional Council of Mustafa Abdel Jalil to clamp down. But he and the government complain they lack the means to do so. Libyans, the United Nations secretary-general said in an anniversary statement, must "insist that a revolution in the name of human rights must not be tarnished by abuses." "Today, Libyans are within reach of a democratic future which one year ago seemed only a distant dream," Ban Ki-moon's spokesman said in the statement, urging "all Libyans to stand together in a spirit of reconciliation." In remarks reflecting concern among liberals about the rise of Islamist forces, he said women in particular must be able to play their part in the development of open government. NTC head Abdel Jalil, in a speech on television, renewed the promises heard so frequently in the past year: "We are going to build a state, democratic institutions and civil institutions. All the people will be the equal before the law," he said. This state will serve every citizen. Addressing the crowds in Benghazi, Prime Minister Abdurrahim El-Keib made similar promises. "We promise to find Gaddafi loyalists who are abroad, who were involved in killing or stealing Libyan money," he added. Heckled by the crowd about the lack of a functioning national army, he said: "We promise to build up our national army ... Let's stay united until we reach the safe land. Cold, wet weather did not keep down the crowds on what is now known as Freedom Square nor appear to dampen the spirits of those who ventured out, a year after the city first rose up, and 11 months after Western powers launched air strikes to spare it from Gaddafi's wrath. "I am happy for the Libyan people," said pensioner Morjaa al-Manafi, 66, who came out wearing traditional dress. "So far," he conceded, "I haven't seen any progress - except for freedom of speech. Now the Libyans speak their minds everywhere. Now, he said, the government had to get to work: "Education is a priority - it is more important than oil." Mohammed Qomati, 24 and out of work, said: "I feel so happy. This day is special. We never thought we would live such a moment. He too, felt little tangible had yet changed: "But I am hoping for the best," he said. The future will be better. Security is the most important thing they need to take care of. At Gaddafi's old Tripoli compound, now reduced to rubble, those flags dotted the derelict landscape. Several families have moved into the few buildings still standing. "Before it was all him, and the people were weak," said Basma, a mother of three, who said she had moved her family in to the Bab al-Aziziyah compound last month. Now, we are equal. But Ezzieddin Agiel, who teaches engineering at Tripoli University, said insecurity could undermine the June election for an assembly whose job will be to frame a constitution. The elections reflect the Libyan quest to build the state and constitution," Agiel added. Celebrations in Benghazi began on Wednesday evening with a torchlit procession to recall the first outbreak of protest a year ago, two days before big demonstrations began. The NTC said diehard Gaddafi loyalists might disrupt the anniversary, but perhaps the biggest risk in Benghazi was from protests by disgruntled supporters of the anti-Gaddafi revolt. Last month, Abdel Jalil was confronted there by a furious, bottle-throwing crowd who complained the NTC was trashing the values of the revolution because it was not transparent about how it spent oil revenues and included officials, like Abdel Jalil himself, who had held senior posts under Gaddafi. "The NTC seems incapable of addressing growing popular anger aimed at it and its chairman ... over the transition process," said Crispin Hawes of the Eurasia Group consultancy. Though it seemed a possibility during the slow-motion desert war last summer, the risks of the country splitting apart along an ancient east-west faultline dividing Tripoli from Benghazi appear to have diminished with peace - but risks remain. February's uprising began in the long discontented east around Benghazi, inspired by unrest that overthrew leaders in neighboring Tunisia and Egypt. It then ground slowly across the country before the sudden fall of Tripoli in August. Gaddafi was killed two months later when he was found hiding in a storm drain after fleeing a siege of his home town of Sirte. Grainy footage of his last moments, bloodied and bewildered as rebels dragged him along a road, recorded the grisly climax of the conflict. His captors then displayed his rotting body for days before burying it in secret in the desert. The most prominent son, Saif al-Islam, who at one stage was tipped to succeed his father, has been held by a militia in the hill town of Zintan since he was captured, disguised as a Bedouin tribesman, deep in the Sahara desert. Local commanders have so far refused requests to hand him over to the authorities in Tripoli. Additional reporting by Mohammed al-Tommy in Benghazi and Taha Zargoun and Ali Shuaib in Tripoli; Editing by Alastair Macdonald