MANAMA (Reuters) - Three hardline Bahraini Shia groups said on Tuesday they had formed a coalition aimed at toppling the Sunni monarchy and setting up a republic, raising tensions days ahead of a planned march on the royal court. The move is likely to be seen as an escalation by the ruling al-Khalifa dynasty and raises the chances of a renewed security crackdown against mainly Shia Muslim protesters. The new "Coalition for a Republic," made up of Al Haq, Wafa and the Freedom movement, called for peaceful change through a decentralised movement of civil disobedience and resistance. Consisting of groups much smaller than the main opposition Wefaq movement, the new coalition risks splitting the broader Shia opposition movement that is demanding an elected govt and a true constitutional monarchy, as well as better access to jobs. "This tripartite coalition adopts the choice of bringing down the existing regime in Bahrain and establishing a democratic republican system," Haq leader Mushaimaa told reporters at Pearl roundabout, where protesters are camped out. "The monarchy has failed to bring down the revolution by force, and it now aims ... to co-opt its legitimate demands through murky political games and ... by inciting chaos." No stranger to sporadic protests and rioting, Bahrain has been gripped by the worst unrest since the 1990s after a youth movement took to the streets last month, emboldened by revolutions that toppled the leaders of Tunisia and Egypt. Seven were killed in an ensuing clampdown by security forces early in the protests, but the situation has since calmed. The majority of Bahrainis are Shias but the island, home to the US Navy's Fifth Fleet, is ruled by the US-backed al-Khalifa family, who are Sunnis. The outcome in Bahrain is being closely watched in neighbouring Saudi Arabia, where Shias make up about 15 percent of the population and which has seen small protests. Risks of instability there would soar if the opposition in Bahrain toppled the ruling al-Khalifa family, analysts said. Al Haq has questioned the legitimacy of the ruling family before and the government has repeatedly arrested its leaders in recent years, including during a security crackdown last August. But Mushaimaa and other Al Haq leaders were pardoned by King Hamad after the protests erupted in Bahrain last month, and Mushaimaa returned from exile in London on February 26. Thousands are still camped out in Manama's Pearl roundabout, many demanding the ouster of the royal family. Bahrain's Wefaq, which draws larger support than the new coalition and the youth movement, is more moderate. Wefaq has called only for the resignation of the government and a constitutional monarchy that cedes more power to the people. Wefaq won 18 seats in parliament in recent elections, but complains the elected lower house can be overruled by an upper house appointed by the king. Wefaq's deputies quit after the protests began but the bloc has not joined in calling for a republic. "The key thing is to create a constitutional assembly now and hold free elections. This will be the only serious move to end this political crisis," said Khalil Marzooq, a Wefaq deputy. The government has made a number of concessions to the opposition since unrest started, including a limited cabinet reshuffle and the release of political prisoners. The Crown Prince has offered dialogue, but opposition groups have set conditions for talks that include the sacking of the cabinet. Shadi Hamid, analyst from the Brookings Centre in Doha, said that the unrest in Bahrain would not end any time soon. "This is really a reflection of the Bahraini government's failure to deal with these protests in an effective manner," he said, adding the government had not made any serious moves towards reforms or started dialogue with the opposition. "We know that the Saudis are going to do whatever they can to back the Khalifa family and the absolute last thing they want to see is talk about the monarchy ending and a republic being the new form of government."