PESHAWAR, Pakistan - A plaque on the wall of the guard booth at the gate of the Pearl Continental Hotel in the Pakistani city of Peshawar reads: This hotel is protected by latest security system.

That system failed late on Tuesday night when militants forced their way through the gate and a suicide truck-bomber drove up to the hotel and set off his explosives bringing down a corner of the five-storey hotel.

Nine people were killed including two foreign U.N. workers. Rescuers were picking through the rubble looking for more victims on Wednesday while heavy lifters were pulling mangled cars from the wreckage.

Peshawar has for thousands of years been a hub and resting point for a succession of invaders, traders and pilgrims who have tramped through the Khyber Pass, the gateway to Afghanistan to the west of the city.

It lies in a fertile valley bordered by peaks and has also long been a center for ethnic Pashtun culture.

But these days the mood is grim and anger with the Taliban is seething.

Our business has been ruined. If the situation continues like this I may move, said Mumtaz Askari, who owns a small book shop in the Storyteller's Bazaar in Peshawar's old city.

Our lives are so insecure. You leave home in the morning and don't know if you'll return in the evening. Women can't go shopping and when children go to school you pray they'll come back safely, Askari said.

Eliminate them once and for all, they're enemies of humanity, he said of the Taliban.

Kalimullah, an Afghan working as a waiter in a nearby roadside cafe serving roasted goat and flat bread, said very few people were going out to eat.

I came here to work because there was peace but now it's the same as Afghanistan, he said. They're not Muslims. A Muslim wouldn't slaughter people like this. They're worse than the Afghan Taliban.

SAD, ANGRY, WORRIED

The Pearl Continental, or PC as it's known, has for years been a favorite haunt of foreign aid workers, journalists and the odd tourist, plus well-heeled and powerful Pakistanis.

In the 1980s, leaders of Afghanistan's holy warrior factions battling Soviet occupiers in their homeland over the nearby border regularly held meetings and news conferences in the hotel.

After the September 11, 2001, attacks on the United States journalists again flocked to the PC to cover the U.S.-led invasion of Afghanistan over subsequent weeks.

There has been no claim of responsibility but there is little doubt it was Pakistani Taliban or their allies who struck one of the city's landmarks.

People are sad, they are angry, they are worried, veteran Peshawar journalist Abdullah Jan told Reuters at his home, which is not far from the PC.

The militants have stepped up attacks in cities since the army launched an offensive in April to clear the Taliban from their bastion in the Swat valley, to the northeast of Peshawar.

Tuesday's blast was the latest in a series of deadly attacks in the city. The Taliban occasionally prowl its outskirts, attacking convoys taking equipment and supplies to the U.S. military in Afghanistan through the Khyber Pass.

These incidents are not doing the Taliban any good but definitely, it will get worse before it gets better, if it gets better, Jan said.

It will get worse when the army goes into Waziristan, he said, referring to a militant stronghold on the Afghan border, to the southwest of Peshawar, which authorities have said might be attacked after Swat.

(Additional reporting and writing by Robert Birsel; Editing by Jeremy Laurence)

Afghanistan Pakistan