Egypt army given temporary power to arrest civilians

CAIRO (Reuters) - Egypt's Islamist president has given the army temporary power to arrest civilians during a constitutional referendum he is determined to push through despite the risk of bloodshed between his supporters and opponents accusing him of a power grab.

Seven people were killed and hundreds wounded last week in clashes between the Islamist Muslim Brotherhood and their critics besieging Mohamed Mursi's graffiti-daubed presidential palace. Both sides plan mass rallies on Tuesday.

The elite Republican Guard has yet to use force to keep protesters away from the palace, which it ringed with tanks, barbed wire and concrete barricades after last week's violence.

Mursi, bruised by calls for his downfall, has rescinded a November 22 decree giving him wide powers but is going ahead with a referendum on Saturday on a constitution seen by his supporters as a triumph for democracy and by many liberals as a betrayal.

A decree issued by Mursi late on Sunday gives the armed forces the power to arrest civilians and refer them to prosecutors until the announcement of the results of the referendum, which the protesters want cancelled.

Despite its limited nature, the edict will revive memories of Hosni Mubarak's emergency law, also introduced as a temporary expedient, under which military or state security courts tried thousands of political dissidents and Islamist militants.

But a military source stressed that the measure introduced by a civilian government would have a short shelf-life.

"The latest law giving the armed forces the right to arrest anyone involved in illegal actions such as burning buildings or damaging public sites is to ensure security during the referendum only," the military source said.

Presidential spokesman Yasser Ali said the committee overseeing the vote had requested the army's assistance.

"The armed forces will work within a legal framework to secure the referendum and will return (to barracks) as soon as the referendum is over," Ali said.

Protests and violence have racked Egypt since Mursi decreed himself extraordinary powers he said were needed to speed up a troubled transition since Mubarak's fall 22 months ago.

The Muslim Brotherhood has voiced anger at the Interior Ministry's failure to prevent protesters setting fire to its headquarters in Cairo and 28 of its offices elsewhere.

Critics say the draft law puts Egypt in a religious straitjacket. Whatever the outcome of the referendum, the crisis has polarized the country and presages more instability at a time when Mursi is trying to steady a fragile economy.

On Monday, he suspended planned tax increases only hours after the measures had been formally decreed, casting doubts on the government's ability to push through tough economic reforms that form part of a proposed $4.8 billion IMF loan agreement.

"VIOLENT CONFRONTATION"

Rejecting the referendum plan, opposition groups have called for mass protests on Tuesday, saying Mursi's eagerness to push the constitution through could lead to "violent confrontation".

Islamists have urged their followers to turn out "in millions" the same day in a show of support for the president and for a referendum they feel sure of winning with their loyal base and perhaps with the votes of Egyptians weary of turmoil.

The opposition National Salvation Front, led by liberals such as Mohamed ElBaradei and Amr Moussa, as well as leftist firebrand Hamdeen Sabahy, has yet to call directly for a boycott of the referendum or to urge their supporters to vote "no".

Instead it is contesting the legitimacy of the vote and of the whole process by which the constitution was drafted in an Islamist-led assembly from which their representatives withdrew.

The opposition says the document fails to embrace the diversity of 83 million Egyptians, a tenth of whom are Christians, and invites Muslim clerics to influence lawmaking.

But debate over the details has largely given way to noisy street protests and megaphone politics, keeping Egypt off balance and ill-equipped to deal with a looming economic crisis.

"Inevitability of referendum deepens divisions," was the headline in Al-Gomhuriya newspaper on Monday. Al Ahram daily wrote: "Political forces split over referendum and new decree."

Mursi issued another decree on Saturday to supersede his November 22 measure putting his own decisions beyond legal challenge until a new constitution and parliament are in place.

While he gave up extra powers as a sop to his opponents, the decisions already taken under them, such as the dismissal of a prosecutor-general appointed by Mubarak, remain intact.

"UNWELCOME" CHOICE

Lamia Kamel, a spokeswoman for former Arab League chief Moussa, said the opposition factions were still discussing whether to boycott the referendum or call for a "no" vote.

"Both paths are unwelcome because they really don't want the referendum at all," she said, but predicted a clearer opposition line if the plebiscite went ahead as planned.

A spokeswoman for ElBaradei, former head of the U.N. nuclear watchdog, said: "We do not acknowledge the referendum. The aim is to change the decision and postpone it."

Mahmoud Ghozlan, the Muslim Brotherhood's spokesman, said the opposition could stage protests, but should keep the peace.

"They are free to boycott, participate or say no, they can do what they want. The important thing is that it remains in a peaceful context to preserve the country's safety and security."

The army stepped into the conflict on Saturday, telling all sides to resolve their disputes via dialogue and warning that it would not allow Egypt to enter a "dark tunnel".

A military source said the declaration read on state media did not herald a move by the army to retake control of Egypt, which it relinquished in June after managing the transition from Mubarak's 30 years of military-backed one-man rule.

The draft constitution sets up a national defense council, in which generals will form a majority, and gives civilians some scrutiny over the army - although not enough for critics.

In August Mursi stripped the generals of sweeping powers they had grabbed when he was elected two months earlier, but has since repeatedly paid tribute to the military in public.

So far the army and police have taken a relatively passive role in the protests roiling the most populous Arab nation.

(Additional reporting by Edmund Blair and Yasmine Saleh; editing by Philippa Fletcher)

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Italy faces vote as Monti leaves, Berlusconi returns

ROME: Italian officials on Sunday readied for early elections after Prime Minister Mario Monti said he would soon resign and his predecessor Silvio Berlusconi announced he would run for the top job for the sixth time in two decades.

Monti on Saturday said he would step down as soon as parliament approved next year's budget, which means elections could now be held as early as February -- well before the government's mandate runs out in late April.

"I have matured in my conviction that we could not continue like this any longer," Monti was quoted as saying in an interview with top-selling daily Corriere della Sera, a day after his dramatic move.

Monti said he made his decision after Berlusconi's People of Freedom (PDL) party withdrew its support for him last week.

Party chief Angelino Alfano told parliament on Friday that Italy's debt, unemployment and tax rates had risen, while the economy had plunged since Monti had taken over in November 2011. Monti leads a non-elected cabinet of technocrats.

Alfano went back on the offensive Sunday, saying Monti's government had made "grave errors" and that the PDL was a "responsible force" for Italy.

"We wanted to signal Italians' unease with his economic policies," Alfano said.

Asked about several items of legislation still before parliament, Alfano said his party would only back the budget and a decree to keep open a troubled steel mill in southern Italy that employs thousands of people.

Investors have reacted nervously since the PDL abstained from two confidence votes on the government on Thursday: the stock market plunged and the differential, or "spread", between Italian and benchmark German bonds widened.

Following talks between Monti and President Giorgio Napolitano on Saturday, the president's office said Monti "does not think it possible to continue his mandate and consequently made clear his intention to present his resignation".

Analysts said Monti's decision to speed up the election could also be a way for him to prepare his own entry into politics after three-time prime minister Berlusconi announced his dramatic return.

Berlusconi's decision comes despite a tax fraud conviction earlier this year and an ongoing trial for having sex with an underage 17-year-old prostitute and abusing his powers when premier.

"I am running to win," he said on Saturday, after declaring in October that he would not run.

Most recent polls suggest Berlusconi's party is running in second or even third place, with the main centre-left Democratic Party led by Pier Luigi Bersani expected to win the elections.

Erik Nielsen, chief economist at UniCredit, said he was "not seriously worried" about the prospects for Italy and predicted either a Bersani-led coalition or a new Monti government after the election.

More than three million centre-left voters took to the polls earlier this month to nominate Bersani as their candidate, a former communist with liberal reformist credentials and experience in government.

Some polls put in second place the Five Star Movement, an Internet-based group led by former comedian and populist blogger Beppe Grillo.

In a blog post on Sunday, Grillo criticised Monti saying he was "leaving a country on its knees".

"Watch out for the anger of Italians," he warned.

Primaries held by the movement this month picked dozens of mostly young parliamentary candidates in their 20s and 30s who are campaigning on a series of grassroots issues and environmental causes.

The PDL party had also been due to hold primaries later this month but was forced to cancel them after Berlusconi announced his surprise return.

The party has been riven by infighting ever since Berlusconi stepped down. It has also been hit by a series of scandals over abuse of public funds.

Experts say a campaign against some of Monti's budget cuts and austerity measures could nevertheless play well, as many Italians are feeling the pinch.

Monti's supporters say his administration pulled Italy back from bankruptcy and launched crucial liberal economic reforms, implementing tough but necessary austerity to sort out the public finances after years of mismanagement.

In an interview with Il Sole 24 Ore business daily on Sunday, European Commission President Jose Manuel Barroso cautioned Italy against turning back the clock.

Barroso praised Monti for "putting public finances back in order and reforming the economy and for his role in the European debate.

"Italians should not fall under the illusion that there are quick or magic solutions," he told the paper.

"The next elections should not become a pretext to put in doubt the necessity of the measures approved until now."

On the sidelines of an economic conference in Cannes, Monti said on Saturday: "I am convinced that whatever government succeeds me, the wisdom of the men and women in Italian politics will prevail.

"I am sure there will not be an attempt to destroy what we have been able to do to secure Italy's public finances," he added. There was still an "enormous amount to do for growth."

-AFP/ac

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India misguided, paranoid over China: Guha

Shreya Roy Chowdhury, TNN Dec 8, 2012, 06.12AM IST

MUMBAI: A good half-hour into the discussion on 'India, China and the World', historian Ramachandra Guha issued a disclaimer—all the three members on the panel had been to China only once. "We should learn their language, promote quality research, and have a panel on China driven by Chinese scholars," he said. And that was the general tenor of the debate—that the Indian attitude to China was influenced by a mix of ignorance, cautious optimism about partnerships and a whole lot of misguided paranoia. "Don't demonise the Chinese, please," Guha finally said in response to a question.

"China has existed in our imaginations," observed Sunil Khilnani, professor of politics and author of The Idea Of India. "There's been very little sustained engagement with the reality of China and very little of our own produced knowledge about China." It was after the events of 1962 ('war' in the popular imagination, 'skirmish' to the scholars participating in the discussion), explained Khilnani, that a miffed India "withdrew". It's the 50th anniversary of that exchange this year, and "what we haven't been able to do is learn from the defeat", observed Khilnani. Both could have benefited from greater engagement. "China has had a very clear focus on primary education and achieved high levels of literacy before its economic rise. It has also addressed the issue of land reform," said Khilnani. Guha added that China could learn from the "religious, cultural and linguistic pluralism" in India.

But China and India weren't always so out of sync with each other. Srinath Raghavan, a scholar of military history, got both Guha and Khilnani to talk about pre-1962 relations between the two when the picture was rosier. Tagore was interested in China and so was Gandhi. Both were very large countries with large populations and shared what Guha calls a "lack of cultural inferiority". "They were both," he continued, "also heavily dependent on peasant communities." Nehru was appreciative of China's will to modernize and industrialize and its adoption of technology to achieve those ends. In turn, Chinese politicians argued for Indian independence.

Things soured more, feel both Khilnani and Guha, after the Dalai Lama fled to India in 1959. "He was welcomed here as a spiritual leader but the intensification of the conflict dates to the Dalai Lama's flight," said Guha. Both Guha and Khilnani argued that Nehru's decision to not react aggressively to China's occupation of Tibet was, in the long run, the right one and prevented further "militarization" of the region. An audience member wondered if that didn't make India "China's puppet". Guha disagreed. "If there's a Tibetan culture alive today," he said, "it's not because of Richard Gere. Don't believe in the hypocrisy of the Western countries. Will they give them land, employment, dignified refuge? The Tibetans is one of the few cases in which our record is honorable."

But the difference in levels of development and the lopsided trade relations between the two countries have only fuelled the suspicions many Indians seem to harbour about China. People were worried, said Guha, even about cricket balls made in China. Audience questions reflected those worries. A member asked about China's "strategy to conquer the world" and its likely impact on India. Guha cautioned against stereotypes; Khilnani explained, "History is littered with the debris of states that have tried to dominate the world. What we're doing may be more long-lasting."

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Smokers celebrate as Wash. legalizes marijuana

SEATTLE (AP) — The crowds of happy people lighting joints under Seattle's Space Needle early Thursday morning with nary a police officer in sight bespoke the new reality: Marijuana is legal under Washington state law.

Hundreds gathered at Seattle Center for a New Year's Eve-style countdown to 12 a.m., when the legalization measure passed by voters last month took effect. When the clock struck, they cheered and sparked up in unison.

A few dozen people gathered on a sidewalk outside the north Seattle headquarters of the annual Hempfest celebration and did the same, offering joints to reporters and blowing smoke into television news cameras.

"I feel like a kid in a candy store!" shouted Hempfest volunteer Darby Hageman. "It's all becoming real now!"

Washington and Colorado became the first states to vote to decriminalize and regulate the possession of an ounce or less of marijuana by adults over 21. Both measures call for setting up state licensing schemes for pot growers, processors and retail stores. Colorado's law is set to take effect by Jan. 5.

Technically, Washington's new marijuana law still forbids smoking pot in public, which remains punishable by a fine, like drinking in public. But pot fans wanted a party, and Seattle police weren't about to write them any tickets.

In another sweeping change for Washington, Gov. Chris Gregoire on Wednesday signed into law a measure that legalizes same-sex marriage. The state joins several others that allow gay and lesbian couples to wed.

The mood was festive in Seattle as dozens of gay and lesbian couples got in line to pick up marriage licenses at the King County auditor's office early Thursday.

King County and Thurston County announced they would open their auditors' offices shortly after midnight Wednesday to accommodate those who wanted to be among the first to get their licenses.

Kelly Middleton and her partner Amanda Dollente got in line at 4 p.m. Wednesday.

Hours later, as the line grew, volunteers distributed roses and a group of men and women serenaded the waiting line to the tune of "Chapel of Love."

Because the state has a three-day waiting period, the earliest that weddings can take place is Sunday.

In dealing with marijuana, the Seattle Police Department told its 1,300 officers on Wednesday, just before legalization took hold, that until further notice they shall not issue citations for public marijuana use.

Officers will be advising people not to smoke in public, police spokesman Jonah Spangenthal-Lee wrote on the SPD Blotter. "The police department believes that, under state law, you may responsibly get baked, order some pizzas and enjoy a 'Lord of the Rings' marathon in the privacy of your own home, if you want to."

He offered a catchy new directive referring to the film "The Big Lebowski," popular with many marijuana fans: "The Dude abides, and says 'take it inside!'"

"This is a big day because all our lives we've been living under the iron curtain of prohibition," said Hempfest director Vivian McPeak. "The whole world sees that prohibition just took a body blow."

Washington's new law decriminalizes possession of up to an ounce for those over 21, but for now selling marijuana remains illegal. I-502 gives the state a year to come up with a system of state-licensed growers, processors and retail stores, with the marijuana taxed 25 percent at each stage. Analysts have estimated that a legal pot market could bring Washington hundreds of millions of dollars a year in new tax revenue for schools, health care and basic government functions.

But marijuana remains illegal under federal law. That means federal agents can still arrest people for it, and it's banned from federal properties, including military bases and national parks.

The Justice Department has not said whether it will sue to try to block the regulatory schemes in Washington and Colorado from taking effect.

"The department's responsibility to enforce the Controlled Substances Act remains unchanged," said a statement issued Wednesday by the Seattle U.S. attorney's office. "Neither states nor the executive branch can nullify a statute passed by Congress."

The legal question is whether the establishment of a regulated marijuana market would "frustrate the purpose" of the federal pot prohibition, and many constitutional law scholars say it very likely would.

That leaves the political question of whether the administration wants to try to block the regulatory system, even though it would remain legal to possess up to an ounce of marijuana.

Alison Holcomb is the drug policy director of the American Civil Liberties Union of Washington and served as the campaign manager for New Approach Washington, which led the legalization drive. She said the voters clearly showed they're done with marijuana prohibition.

"New Approach Washington sponsors and the ACLU look forward to working with state and federal officials and to ensure the law is fully and fairly implemented," she said.

___

Johnson can be reached at https://twitter.com/GeneAPseattle

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Banda Superstar Jenni Rivera's Plane Missing

Mexican officials have confirmed the disappearance of a private jet carrying regional Mexican music superstar Jenni Rivera that took off from the northern Mexican city of Monterrey at 3:15 a.m. local time on Sunday and fell off the radar 10 minutes (or 62 miles) after take-off.

The Learjet 25 jet is believed to have been carrying seven people – five passengers and two pilots. It was headed for Toluca International Aiport, located outside of Mexico City, where it was meant to arrive at 4:40 a.m. An official search for the jet was initiated at sunrise.

Rivera's publicist Arturo Rivera is believed to have been on that flight. His most recent tweets are of photos from Rivera's concert in Monterrey on Saturday night.

The Mexican American singer's most recent tweet is a re-tweet of what appears to be a fan's message.

Rivera was due in Toluca this evening for the taping of a Mexican TV show, La Voz.

Known as La Diva de la Banda and beloved by fans on both sides of the border, Rivera, 43, has had a groundbreaking career in regional Mexican music, selling some 15 million records. Among her many feats in a male-dominated genre, she made history in September 2011 when she sold out the Staples Center in Los Angeles, the first female regional Mexican artist to do so. Her reality show on mun2, I Love Jenni, is one of the network's highest rated shows. Rivera made her film debut at the 2012 Sundance Film Festival in the indie family drama Filly Brown, due in theaters in January 2013.

See Also: 'Filly Brown Gives Jenni Rivera a Chance to Grow and Gina Rodriguez a Chance to Shine

The Long Beach, Calif.-born singer's personal life has often called for as much attention as her career. A mother of five, Rivera had filed for divorce from baseball player Esteban Loaiza in October after two years of marriage, citing "irreconcilable differences." Soon after, rumors of an affair between Loaiza and Rivera's own daughter Chiquis surfaced, which Chiquis addressed on Twitter in October by saying, "I would NEVER do that, Ever! That's a horrible accusation."

The search for Rivera's jet continues. This is a developing story.

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Italy's Monti to resign as premier

ROME: Italian Prime Minister Mario Monti is stepping down, the president's office announced Saturday, just hours after the man he replaced, Silvio Berlusconi, said he would run again for head of government.

Monti "does not think it possible to continue his mandate and consequently made clear his intention to present his resignation," said the statement from President Giorgio Napolitano's office.

The announcement came after Monti met with the president at the presidential palace for more than an hour. Already Friday, Monti had held talks with parliamentary political leaders, including Angelino Alfano, of Berlusconi's People of Freedom (PDL) party.

Monti would check to see if the various political parties were ready to approve the budget his government had advanced as soon as possible. But once that had been done, he would step down, said the statement.

Comments Alfano has made in parliament amounted to a declaration of no confidence in Monti's government and its policies, the statement added.

"We believe the experience of the Monti government is over, Alfano told parliament earlier this week. But he added that as the PDL wanted an "orderly conclusion" to the legislature, it would not try to bring down the government.

Monti's government had in any case been due to step down in spring next year. A general election had been expected in March or April, though the precise date has not been set.

But Berlusconi's right-wing PDL fired a shot across the government's bows on Thursday, twice abstaining from confidence votes in the government to protest Monti's policies.

Recent polls have suggested that the centre-left Democratic Party would win an election poll -- but not with an outright majority, forcing it to seek coalition partners. The party is now led by Luigi Bersani, who was voted into the post only last weekend.

Berlusconi meanwhile said in his statement earlier Saturday that he had opened talks with former coalition allies the Northern League to try to agree on backing a single candidate.

- AFP/fa

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India misguided, paranoid over China: Guha

MUMBAI: A good half-hour into the discussion on 'India, China and the World', historian Ramachandra Guha issued a disclaimer—all the three members on the panel had been to China only once. "We should learn their language, promote quality research, and have a panel on China driven by Chinese scholars," he said. And that was the general tenor of the debate—that the Indian attitude to China was influenced by a mix of ignorance, cautious optimism about partnerships and a whole lot of misguided paranoia. "Don't demonise the Chinese, please," Guha finally said in response to a question.

"China has existed in our imaginations," observed Sunil Khilnani, professor of politics and author of The Idea Of India. "There's been very little sustained engagement with the reality of China and very little of our own produced knowledge about China." It was after the events of 1962 ('war' in the popular imagination, 'skirmish' to the scholars participating in the discussion), explained Khilnani, that a miffed India "withdrew". It's the 50th anniversary of that exchange this year, and "what we haven't been able to do is learn from the defeat", observed Khilnani. Both could have benefited from greater engagement. "China has had a very clear focus on primary education and achieved high levels of literacy before its economic rise. It has also addressed the issue of land reform," said Khilnani. Guha added that China could learn from the "religious, cultural and linguistic pluralism" in India.

But China and India weren't always so out of sync with each other. Srinath Raghavan, a scholar of military history, got both Guha and Khilnani to talk about pre-1962 relations between the two when the picture was rosier. Tagore was interested in China and so was Gandhi. Both were very large countries with large populations and shared what Guha calls a "lack of cultural inferiority". "They were both," he continued, "also heavily dependent on peasant communities." Nehru was appreciative of China's will to modernize and industrialize and its adoption of technology to achieve those ends. In turn, Chinese politicians argued for Indian independence.

Things soured more, feel both Khilnani and Guha, after the Dalai Lama fled to India in 1959. "He was welcomed here as a spiritual leader but the intensification of the conflict dates to the Dalai Lama's flight," said Guha. Both Guha and Khilnani argued that Nehru's decision to not react aggressively to China's occupation of Tibet was, in the long run, the right one and prevented further "militarization" of the region. An audience member wondered if that didn't make India "China's puppet". Guha disagreed. "If there's a Tibetan culture alive today," he said, "it's not because of Richard Gere. Don't believe in the hypocrisy of the Western countries. Will they give them land, employment, dignified refuge? The Tibetans is one of the few cases in which our record is honorable."

But the difference in levels of development and the lopsided trade relations between the two countries have only fuelled the suspicions many Indians seem to harbour about China. People were worried, said Guha, even about cricket balls made in China. Audience questions reflected those worries. A member asked about China's "strategy to conquer the world" and its likely impact on India. Guha cautioned against stereotypes; Khilnani explained, "History is littered with the debris of states that have tried to dominate the world. What we're doing may be more long-lasting."

Read More..

Egypt Terror Leader Possibly Linked to Benghazi Attack Arrested

Dec 8, 2012 2:16pm

Mohammad Hannon/AP Photo

The leader of an Egyptian terrorist cell that planned attacks in Egypt and may be linked with the storming of the U.S. consulate in Benghazi, Libya on Sept. 11 has been arrested by Egyptian intelligence officers, according to an official close to Egypt’s intelligence agency and a senior U.S. official.

Mohammad Jamal Abdo Ahmed had become one of Egypt’s most dangerous terrorists and led a small cell of Egyptians that collected suicide vests, bombs and grenades before their Cairo safe house was raided by intelligence officials in late October, according to the U.S. official.

PHOTOS: Benghazi: US Consulate Attack Aftermath

Most of the cell’s targets were Egyptian, but both the U.S. and Egyptian officials said Ahmed admitted to traveling to Libya and assisting Ansar al Sharia, which U.S. officials suspect organized the attack on the consulate that killed U.S. Ambassador to Libya Chris Stevens.

READ: More on the Political Fallout From the Benghazi Attack

Until now, neither the United States nor Egypt has determined exactly what role Ahmed played in the attack in eastern Libya, according to both officials.

Ahmed may have also been planning attacks on U.S. targets in Egypt and neighboring countries, the U.S. official said, and had aspirations to join al Qaeda.

Ahmed, who is Egyptian, was arrested two weeks ago in eastern Egypt in the Sharqiyah province, the Egyptian official said.

Egyptian officials continue to question him and he will remain in custody for another 15 days, according to the Egyptian official.

His arrest was first reported by the Wall Street Journal.

READ: Four Americans Slain in Libya ‘Come Home’

SHOWS: World News

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Egyptian military says only dialogue can avert disaster

CAIRO (Reuters) - Egypt's military, stepping into a crisis pitting Islamist President Mohamed Mursi against opponents who accuse him of grabbing excessive power, said on Saturday only dialogue could avert "catastrophe".

State broadcasters interrupted their programs to read out an army statement telling feuding factions that a solution to the upheaval in the most populous Arab nation should not contradict "legitimacy and the rules of democracy".

That sounded like a swipe at protesters who have besieged the palace of the freely elected president and called for his removal, going beyond mainstream opposition demands for him to retract a decree that expanded his powers.

The statement also called for a "serious" national dialogue - perhaps one more credible than talks convened by Mursi on Saturday in the absence of opposition leaders. They insist he must first scrap his November 22 decree, defer next week's popular vote on a new constitution and allow the text to be revised.

Deep rifts have emerged over the destiny of a country of 83 million where the end of Hosni Mubarak's 30 years of military-backed one-man rule led to a messy army-led transition, during which the Muslim Brotherhood and its allies won two elections. Many Egyptians crave stability and economic recovery.

The spokesman for the main Islamist coalition demanded that the referendum go ahead on time on the constitution drafted by an Islamist-led assembly from which liberals had walked out.

The army, which ran Egypt for months after Mubarak fell in February 2011, again cast itself primarily as the neutral guarantor of the nation. A military source said there was no plan to retake control of the country or its turbulent streets.

"DARK TUNNEL"

"The armed forces affirm that dialogue is the best and only way to reach consensus," the statement said. "The opposite of that will bring us to a dark tunnel that will result in catastrophe and that is something we will not allow."

Mursi's office said the president opened his "national dialogue" with about 40 political and other public figures discussing "means to reach a solution to differences over the referendum...and the constitutional decree".

Prime Minister Hisham Kandil told an Egyptian television channel that the talks had led to creating a committee to review Mursi's November 22 decree and to work out legal ways to postpone the referendum. He said a new decree could be issued.

"All options are on the table to reach consensus," he said, adding that it was vital to take action to shore up Egypt's economy that has been battered by the turmoil.

The main opposition coalition, the National Salvation Front, which boycotted Mursi's dialogue repeated its call on Saturday for scrapping the decree and the referendum on the constitution.

Instability in Egypt worries the West, especially the United States, which has given Cairo billions of dollars in military and other aid since it made peace with Israel in 1979.

The army might be pushing the opposition to join dialogue and Mursi to do more to draw them in, said Hassan Abu Taleb of the Al Ahram Center for Political and Strategic Studies.

He discounted the chance of direct military intervention, adding: "They realize that interfering again in a situation of civil combat will squeeze them between two rocks."

However, the military did seem poised to take a more active role in security arrangements for the December 15 referendum.

A cabinet source said the cabinet had discussed reviving the army's ability to make arrests if it were called upon to back up police, who are normally in charge of election security.

According to the state-run daily al-Ahram, an expanded military security role might extend to the next parliamentary election and, at the president's discretion, even beyond that.

The army issued its statement while protesters were still camped out by the gates of the presidential palace.

The tens of thousands of Mursi foes who surged past tanks and barbed wire to reach the palace gates on Friday night had dispersed. But a hard core stayed overnight in a score of tents.

"LEAVE"

Some had spray-painted "Down with Mursi" on tanks of the elite Republican Guard posted there after clashes between rival groups killed at least seven people and wounded 350 this week.

Others draped the tanks with posters of Mursi and the word "Leave" scored across his face in red letters.

"We are no longer calling for scrapping the decree and delaying the referendum," Samir Fayez, a Christian protester at the palace, said. "We have one demand in five letters: leave."

Nearby, a Mursi supporter named Mohamed Hassan was quietly observing the scene. He suggested that the Muslim Brotherhood and its ultra-orthodox Salafi Islamist allies could easily overwhelm their foes if they chose to mobilize their base.

"The Brotherhood and Salafis by themselves are few but they have millions of supporters who are at home and haven't taken it to the streets yet," murmured the 40-year-old engineer.

The Muslim Brotherhood's supreme guide, Mohamed Badie, denounced opposition protests that have swirled around the walls of Mursi's palace, saying they "ruin legitimacy".

Badie said eight people, all of them Brotherhood members, had been killed this week and urged the interior minister to explain why police had failed to prevent assailants from torching the organization's headquarters and 28 other offices.

"Get angry with the Brotherhood and hate us as much as you like, but be reasonable and preserve Egypt's unity," he told a news conference. "We hope everyone gets back to dialogue."

The well-organized Brotherhood, which thrust Mursi from obscurity to power, remains his surest source of support.

(Additional reporting by Edmund Blair, Omar Fahmy and Yasmine Saleh; Editing by Stephen Powell)

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Oil slips amid concerns about demand for crude

NEW YORK: Oil prices slipped Friday as a dip in the US unemployment rate failed to allay skepticism about economic recovery in the United States and Europe and the strength of crude demand.

New York's main contract, West Texas Intermediate for delivery in January, finished at $85.93 a barrel, down 33 cents from Thursday's closing level.

In London trade, Brent North Sea crude for January fell one cent to $107.02

Oil prices were up initially following the release of US government data showing a surprise fall in the nation's unemployment rate to 7.7 per cent in November, its lowest level since December 2008.

"Of course the job report this morning was better than expected," said independent analyst Andy Lipow.

However, he added, there was some amount of skepticism about the impact of Superstorm Sandy, which hit the East Coast in late October and early November. In releasing its statistics, the Labour Department said the hurricane "did not substantively impact" the data.

"Other than that, there (is) still concern with some of the economic news that came out of Europe, notably regarding growth in Germany," he added.

"Those type of headlines continue to weigh on market sentiment."

Also dulling the economic outlook was the release of the University of Michigan consumer sentiment index, which declined to 74.5 from November's 82.7 -- the best level in five years.

The data is crucial for the oil market because the United States is the world's largest consumer of crude.

Market sentiment was also dampened somewhat after Germany's Bundesbank warned that the eurozone powerhouse could sink into recession early next year, but was well placed to rebound strongly.

The German central bank, in its latest updated twice-yearly forecasts, said there were "indications that economic activity may actually fall in the final quarter of 2012 and the first quarter of 2013."

- AFP/fa

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