Denmark, where a newspaper first published the cartoons, temporarily closed its embassy in Pakistan and advised its citizens to leave the country.
An Italian consular official, Antonio Simoes-Concalves, said nine protesters had been killed in the demonstration in the Libyan city of Bengazi as armed police fired bullets and tear gas on a crowd of more than 1,000 demonstrators.
Libyan security officials said 11 people had been killed or wounded, but gave no breakdown.
"They are still continually firing," Simoes-Concalves said late Friday, speaking by telephone from inside the consulate where he was holed up. "They haven't managed to block them."
The Italian Foreign Ministry confirmed that the first floor of the consulate had been set on fire after the crowd charged into the grounds late Friday.
Libyan state television showed firefighters trying to put out the fire, ambulances taking casualties away from the scene and five cars that were severely damaged in the riot.
Security officials said the demonstrators hurled stones and bottles at the consulate, and later entered the grounds and set fire to the building and a consular car.
Police fired shots to try to disperse the crowd, the officials said, speaking on condition of anonymity as they were not authorized to speak to the press.
No Italians were injured, the Italian Foreign Ministry said.
In Pakistan, Mohammed Yousaf Qureshi announced the bounty for killing a cartoonist to about 1,000 people outside the historic Mohabat Khan mosque in the northwestern city of Peshawar.
He said the mosque and the religious school he leads would give a $25,000 reward and a car for killing the cartoonist who drew the caricatures — considered blasphemous by Muslims. He said a local jewelers' association would also give $1 million, but no representative of the association was available to confirm the offer.
"Whoever has done this despicable and shameful act, he has challenged the honor of Muslims. Whoever will kill this cursed man, he will get $1 million dollars from the association of the jewelers bazaar, one million rupees ($16,700) from Masjid Mohabat Khan and 500,000 rupees ($8,350) and a car from Jamia Ashrafia as a reward," Qureshi said.
"This is a unanimous decision of by all imams of Islam that whoever insults the prophets deserves to be killed and whoever will take this insulting man to his end, will get this prize," he said.
Qureshi did not name any cartoonist in his announcement and he did not appear aware that 12 different people had drawn the pictures.
A Danish newspaper, Jyllands-Posten, first printed the prophet pictures in September. The newspaper has since apologized to Muslims for the cartoons, one of which shows Muhammad wearing a bomb-shaped turban. Other Western newspapers, mostly in Europe, have reprinted the pictures, asserting their news value and the right to freedom of expression.
In Denmark, a spokesman for the Jyllands-Posten declined comment on the bounty offer. But Mogens Blicher Bjerregaard, president of the Danish Journalist Union and spokesman for the cartoonists, condemned it.
"It is totally absurd what is happening. The cartoonists just did their job and they did nothing illegal," he said.
He said the cartoonists — who have been living under police protection since last year — are aware of the reward and are "feeling bad about the whole situation." He did not say whether their security had been stepped up.
Unrest over the cartoons has spiraled in Pakistan. Riots in Lahore and Peshawar this week caused millions of dollars in damage. Hundreds of vehicles were burned and protesters targeted U.S. and other foreign businesses. Five people were killed.
Intelligence officials have said scores of members of radical and militant Islamic groups joined the protests in Lahore on Tuesday and incited violence in a bid to undermine President Gen. Pervez Musharraf's government, a close ally of the United States.
On Friday, police confined the leader of the militant group Jamaat al-Dawat, Hafiz Mohammed Saeed, to his home to stop him from addressing supporters in the city of Faisalabad, about 75 miles away, his spokesman Yahya Mujahid said.
A senior police official in Lahore who confirmed Saeed's detention said the government had ordered police to restrict the movement of all religious leaders who might address rallies and to round up religious activists "who could be any threat to law and order."
The official spoke on condition of anonymity because of the sensitivity of the matter.
In Islamabad, visiting former President Bill Clinton criticized the cartoons but said Muslims wasted an opportunity to build better ties with the West by holding violent protests.
"I can tell you, most people in the United States deeply respect Islam ... and most people in Europe do," he said.
Denmark, meanwhile, said it had temporarily closed its embassy in Pakistan and urged Danes to leave the country. Last week, Denmark temporarily shut its embassies in Lebanon, Syria, Iran and Indonesia.
In neighboring India, police used batons and tear gas to disperse thousands of angry worshippers who rioted in the southern city of Hyderabad. Hundreds more protested in Bangladesh.
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