Russia says Syrian rebels might win

MOSCOW/BEIRUT (Reuters) - Syrian rebels are gaining ground and might win, Russia's Middle East envoy said on Thursday, in the starkest such admission from a major ally of President Bashar al-Assad as the 20-month-old civil war closes in on Damascus.

Moscow was "finally waking up to reality", the United States said and it called on Russia to withdraw all support for Assad, who NATO and the rebels' new political leader forecast was heading for collapse.

"One must look the facts in the face," Russia's state-run RIA quoted Mikhail Bogdanov as saying. "Unfortunately, the victory of the Syrian opposition cannot be ruled out."

Bogdanov, a deputy foreign minister and the Kremlin's special envoy for Middle East affairs, said the Syrian government was "losing control of more and more territory" and Moscow was preparing to evacuate Russian citizens if necessary.

In Washington, State Department spokeswoman Victoria Nuland said: "We want to commend the Russian government for finally waking up to the reality and acknowledging that the regime's days are numbered.

"The question now is, will the Russian government join those of us in the international community who are working with the opposition to try to have a smooth democratic transition?"

Syria has relied on war planes and helicopters to bombard rebel districts but Damascus denied accusations by U.S. and NATO officials that it had fired Scud missiles in recent days.

The foreign ministry said the long-range missiles were not used against "terrorist groups," a term it uses for the rebels, who now hold an almost continuous arc of territory from the east to the southwest of Damascus.

The head of NATO said he thought Assad's government was nearing collapse and the new leader of Syria's opposition told Reuters the people of Syria no longer needed international forces to protect them.

"The horrific conditions which the Syrian people endured prompted them to call on the international community for military intervention at various times," said Mouaz al-Khatib, a preacher who heads Syria's National Coalition.

"Now the Syrian people have nothing to lose. They handled their problems by themselves. They no longer need international forces to protect them," he added in the interview on Wednesday night, accusing the international community of slumbering while Syrians were killed.

He did not specify whether by intervention he meant a no-fly zone that rebels have been demanding for month, a ground invasion - which the opposition has warned against - or arms.

He said the opposition would consider any proposal from Assad to surrender power and leave the country, but would not give any assurances until it saw a firm proposal.

In the latest blow to the government, a car bomb killed at least 16 men, women and children in Qatana, a town about 25 km (15 miles) southwest of Damascus where many soldiers live, activists and state media said.

The explosion occurred in a residential area for soldiers in Qatana, which is near several army bases, said Rami Abdelrahman, head of the pro-opposition Syrian Observatory for Human Rights.

He put the death toll as 17, including seven children and two women. State news agency SANA said 16 people had died.

State television showed soldiers walking by a partly collapsed building, with rubble and twisted metal on the road.

The pro-government Al-Ikhbariya TV said a second car bomb in the Damascus suburb of al-Jadideh killed eight, most of them women and children.

Apart from gaining territory in the outskirts of Damascus in recent weeks, rebels have also made hit-and-run attacks or set off bombs within the capital, often targeting state security buildings or areas seen as loyal to Assad, such as Jaramana, where twin bombs killed 34 people in November.

The Pakistani Foreign Office said security concerns had prompted it to withdraw the ambassador and all Pakistani staff from the embassy in the central suburb of East Mezzeh, a couple miles from the Interior Ministry.

BACK TO THE WALL

With his back to the wall, Assad was reported to be turning ever deadlier weapons on his adversaries.

"I think the regime in Damascus is approaching collapse," NATO Secretary-General Anders Fogh Rasmussen said on Thursday.

Human Rights Watch said some populated areas had been hit by incendiary bombs, containing flammable materials such as napalm, thermite or white phosphorous, which can set fire to buildings or cause severe burns and respiratory damage.

The British-based Syrian Observatory said war planes were bombing rebel-held eastern suburbs of Damascus on Thursday and artillery was hitting Daraya and Moadamiyeh, southwestern areas near the centre where rebels have been fighting for a foothold.

At least 40,000 people have been killed in Syria's uprising, which started in March 2011 with street protests which were met with gunfire by Assad's security forces, and which spiraled into the most enduring and destructive of the Arab revolts.

The United States, European powers and Arab states bestowed their official blessing on Syria's newly-formed opposition coalition on Wednesday, despite increasing signs of Western unease at the rise of militant Islamists in the rebel ranks.

Western nations at "Friends of Syria" talks in Marrakech, Morocco rallied around a new opposition National Coalition formed last month under moderate Islamist cleric al-Khatib.

Russia, which along with China has blocked any U.N. Security Council measures against Assad, criticized Washington's decision to grant the coalition formal recognition, saying it appeared to have abandoned any effort to reach a political solution.

Bogdanov's remarks were the clearest sign yet that Russia is preparing for the possible defeat of Assad's government.

"We are dealing with issues of preparations for an evacuation. We have mobilization plans and are clarifying where our citizens are located," Bogdanov said.

The fall of Damascus to the rebels was not a prospect Moscow relished: "The fighting will become even more intense and (Syria) will lose tens of thousands and, perhaps, hundreds of thousands of civilians," Bogdanov told Russia Today television.

"If such a price for the removal of the president seems acceptable to you, what can we do? We, of course, consider it absolutely unacceptable."

Nuland said Russia should now back away from Assad: "They can withdraw any residual support for the Assad regime, whether it is material support (or) financial support," she said.

"They can also help us to identify people who might be willing inside of Syria to work on a transitional structure."

A British Foreign Office spokesperson said the Russian position remained largely unchanged but the situation on the ground gave Moscow an interest in finding an agreed solution, even if the chances of such a solution remained slim.

"If Russia's position on Syria had been a brick wall, it is now a brick wall with a crack in it," the spokesperson said.

(Additional reporting by Dominic Evans in Beirut, Samia Nakhoul and Khaled Yacoub Oweis in Marrakech, Andrew Quinn in Washington and Mohammed Abbas in London; Editing by Philippa Fletcher and Alastair Macdonald)

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Fed sets inflation, jobless targets for hiking rates

WASHINGTON: The US Federal Reserve laid out target levels on unemployment and inflation for raising interest rates for the first time Wednesday, surprising analysts who expected such a move would wait until next year.

In an effort to better signal its policy path, after its benchmark rate has been locked at 0-0.25 percent for four years, the Fed said it would not lift rates as long as the inflation outlook was below 2.5 percent and the jobless rate, now at 7.7 percent, stays above 6.5 percent.

Saying the economy continues to grow only at a "moderate" rate, the Federal Open Market Committee also launched a new, open-ended $45 billion a month bond-buying program to replace the bond-swap Operation Twist program that expires at year-end.

That will take its total "quantitative easing" asset purchases, of both Treasury bonds and mortgage-backed securities, aimed at pushing down long-term rates to encourage investment, to $85 billion a month.

After a two-day policy meeting, Fed Chairman Ben Bernanke stressed that the economy, while growing at a moderate pace, was still hindered by high unemployment, which he called "an enormous waste of human and economic potential."

He also warned that Congress and the White House needed to urgently find a solution to the fiscal cliff crisis, which could send the economy back into recession next year.

"Even though we have not even reached the point of the fiscal cliff potentially kicking in, it's already affecting business investment and hiring decisions by creating uncertainty or creating pessimism," Bernanke said at a post-meeting news conference.

Even with the new target thresholds, the FOMC essentially held close to its course of the past year, stressing that its current "highly accommodative" monetary policy will stay in place even after the economy starts turning up.

Its benchmark interest rate would hold at the current level "at least as long as the unemployment rate remains above 6.5 percent" and inflation over the horizon of one to two years is projected at lower than 2.5 percent.

Such a stipulation was far more explicit than previous Fed guidance, which forecast that its easy-money policy would be in place "at least through mid-2015."

With prospects low for a rebound in inflation, it also further enshrined combatting unemployment as the primary focus of Fed policy for the next two or three years.

Jim O'Sullivan of High Frequency Economics said the change in the forecasting language suggested that FOMC members see the economy possibly improving over the next couple years more firmly than they had previously forecast.

"The signal is similar but is more clearly conditional," O'Sullivan said.

"As we have been writing, we see risks tilted toward a more rapid-than-expected decline in unemployment continuing."

But Federal Reserve Chairman Ben Bernanke stressed that the FOMC was not signaling greater optimism.

Tying future monetary policy moves to specific conditions will make policy more transparent and predictable, he told journalists.

"The change in the form of the committee's forward guidance does not in itself imply any change in the committee's expectations of the likely future path of the federal funds rate since the October meeting," he said.

Indeed, the FOMC cut very slightly its growth forecast for next year to 2.3-3.0 percent, from around 1.8 percent this year.

And the survey of FOMC participants showed only five of 19 saw monetary policy tightening by 2014, the same as the October meeting.

Markets liked the news for only a short time, shooting up before falling back to around break-even level at the close.

The dollar suffered, though, falling to $1.3065 against the euro.

-AFP/ac

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What women's empowerment when competent ones dropped from govt panel: Indira Jaising

NEW DELHI: India's first woman additional solicitor general Indira Jaising criticized the Centre's decision to drop several "competent" women lawyers from its panel for handling government litigation in the Supreme Court and asked law minister Ashwani Kumar whether they needed a 'godfather' to succeed in the legal profession.

Recent changes in the panel of lawyers made Jaising, who is among a handful of women lawyers designated as senior advocates in the country, write to the law minister complaining that though the government took pride in empowering women through various steps, the dropping of 'competent' women lawyers from the central government panel had sent a wrong message.

"This can only send a very wrong message to the (legal) profession as a whole and to women in particular that there is no place for them in the profession. Even otherwise, the perception among people is that only those with powerful godfathers or godmothers (of which there may be very few) can progress in the profession," Jaising said.

She said this perception needed urgent correction and a message ought to be sent out loud and clear if "we mean to encourage competent lawyers and women in particular". "Several women I know who have assisted me competently have been dropped from the panels with no notice or appreciable reason," she said, justifying her angst against the alleged arbitrary dropping of women lawyers from the panels.

She clarified that she was not advocating priority for women but said the government needed to guard against them being discriminated against in a systemic manner. "I recognize that 'merit' and 'competence' must be the guiding principles in making appointments and selection, but it is a matter of common knowledge that 'merit' itself is not a neutral word but a social construct, which tends to entrench the privilege of the privileged.

"I have no doubt that women lawyers can assist in formulating policies which are just and fair to all concerned," she said while expressing concern over the dismal representation of women in the legal profession.

"They are also grossly underrepresented in the judiciary. Indeed, one would expect that they constitute at least 50% of the judiciary as they do in population. There is need to address these issues on an urgent basis," she added.

"A glance at the number of women designated senior counsel show that there are only four to five such designated seniors in the Supreme Court. This is the position in all the high courts as well. All these issues do require the attention of policy makers and of law makers," she further said.

In another letter addressed to the Chief Justice of India, Jaising requested Justice Altamas Kabir to explore the possibility of providing a creche facility within the Supreme Court for women lawyers who may want to leave their toddlers there while attending to work in the court.

dhananjay.mahapatra@timesgroup.com

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Congress examines science behind HGH test for NFL

WASHINGTON (AP) — A congressional committee has opened a hearing to examine the science behind a human growth hormone test the NFL wants to start using on its players.

Nearly two full seasons have passed since the league and the players' union signed a labor deal that set the stage for HGH testing.

The NFL Players Association won't concede the validity of a test that's used by Olympic sports and Major League Baseball, and the sides haven't been able to agree on a scientist to help resolve that impasse.

Among the witnesses before the House Oversight and Government Reform Committee on Wednesday is Pro Football Hall of Fame member Dick Butkus. In his prepared statement, Butkus writes: "Now, let's get on with it. The HGH testing process is proven to be reliable."

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Why Mass Shooters Often Wear Masks

The Oregon mall shooter was dressed all in black and his face was covered by a white hockey mask.

The mask, the black clothes, the age of the gunman and a weapon are becoming a familiar and deadly pattern.

The gunman, 22-year-old Jacob Tyler Roberts of Portland, is one of a string of killers before him, including Aurora shooter James Holmes, who chose to wear black and cover their faces with masks.

Hero Saves Customer At Mall Shooting

For these cold-hearted killers, the costume bolsters their confidence and power as they carry out their depraved fantasies, said Dr. Mary Ellen O'Toole, a retired FBI profiler.

"They're doing it because it's a role. It's almost like a big game and like they're the puppet master. They've got the control, the power, the weapons," she told ABCNews.com.

"The biggest thing for a mass shooter is the control and empowerment for the shooting," said former FBI agent and ABC News consultant Brad Garrett. "It isn't uncommon for a shooter to wear a costume, or sometimes simply to dress in black.... He went there being someone other than who he is in reality because it gives him power."

From the costume to his age and ethnicity, Roberts fit the mold of who FBI profilers expected the shooter to be.

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"Its clear the majority [of shooters] are white males, but we can't say anything statistical about that," O'Toole said, pointing to the Virginia Tech shooting, which was perpetrated by a Korean, and the Red Lake shooting, where the gunman was Native American.

Nevertheless, she acknowledged the preponderance of whites among the list of mass killers.

"I think it's a question that needs to be put out there," O'Toole said

There is one thing that can be predicted, however -- age. Most mass shooters are between the ages of 15 and 25, O'Toole said.

"This is where we see young men acting out in a different way," she said, citing increased levels of testosterone. "It has to do with their biological make-up and development."

Garrett said that the age period between 15 to 25 years can also be a time when young men might feel the world is passing them by, stifling what they could have been. The desire to be remembered, he said, can be a factor that can cause unstable young men to kill.

They may have thoughts of, "I can be more than I am if you didn't stop me," Garrett said, adding that the "you" didn't necessarily refer to a specific individual.

Shooting Was Survivor's Second Brush With Death

Psychiatric issues are another commonality with mass killers, said Garrett.

"The idea that you can walk into a mall or any other location and shoot people is very intoxicating for these people. They typically do not feel empowered during the day," he said. "Depression, manic depression play into feelings of inadequacy."

As Roberts walked through the Clackamas Town Center, intent on killing as many people as possible, witnesses said he was looking straight ahead, shooting along the way.

PHOTOS: Oregon Mall Shooting

Two people were killed and one wounded before Roberts took his own life.

While investigators try to piece together what made Roberts snap, O'Toole warned the cycle of gun violence will continue.

"Somewhere, there is a male in this age range thinking of outdoing the shooter in Aurora and outdoing the shooter in Oregon and they are watching this and saying, 'I am going to do it.'"

ABC News' Colleen Curry and Jared Weiner contributed to this report

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US blacklists Al-Qaeda-linked rebels in Syria

WASHINGTON: Washington blacklisted an Al-Qaeda-linked rebel group in Syria Tuesday, warning extremists could play no role in building the nation's future as the US readies to recognize the new Syrian alliance.

The move against the Al-Nusra Front came ahead of talks in Morocco on Wednesday, when the United States is expected to give full recognition to the Syrian National Coalition as the legitimate representative of the Syrian people.

Though a minority, Al-Nusra has been one of the most effective rebel groups fighting to overthrow President Bashar al-Assad, raising concerns that hardline extremists are hijacking the 21-month-old revolt.

"What is important is to understand that extremists fighting the Assad regime are still extremists and they have no place in the political transition that will come," a senior State Department official said.

"Extremists should not dictate that political transition," he insisted on a conference call with journalists, asking to remain anonymous.

The State Department designated the group linked to Al-Qaeda in Iraq (AQI) a foreign terrorist organization, while the Treasury also slapped sanctions on two of its leaders, Maysar Ali Musa Abdallah al-Juburi and Anas Hasan Khattab.

"Exposing the operation and the identities of Al-Nusra's leaders is a key objective here," another top US official said.

Topping the agenda at the Friends of Syria meeting in Marrakech will be two key issues -- the political transition after Assad's fall and mobilizing humanitarian aid as winter sets in amid a growing refugee crisis.

Declaring Al-Nusra a terrorist group freezes its assets and bans Americans from any transactions with it, but US officials said it would also help ensure that vital aid is falling into the right hands.

Countries wanting to support the opposition need to ensure they are helping "those opposition groups who truly have the best interest of Syria and Syrians in mind," State Department spokeswoman Victoria Nuland said.

They should not back "groups coming from the outside who want to hijack what the Syrian people have started for their own means, and have a very different future in mind, a future that is based in Al-Qaeda-based values and principles, not democratic-based principles and values."

The group has claimed responsibility for recent suicide bombings that killed scores of people, and has said it hopes to replace the Assad family's four-decade hold on power with a strict Islamic state.

Wednesday's talks could mark a step forward for the Syrian opposition, which had struggled for months to unite until a new coalition arose from November meetings in Qatar.

"Now that there is a new opposition formed, we are going to be doing what we can to support that opposition," US Secretary of State Hillary Clinton said in Brussels last week.

Clinton had planned to attend the Marrakesh meeting but canceled her trip on Monday due to illness. Deputy Secretary of State William Burns is traveling in her place.

She also met on her Europe trip with Russian Foreign Minister Sergei Lavrov and UN peace envoy Lakhdar Brahimi to see if there were ways to increase the pressure on Assad to step down and end the bloodshed.

Since the last Friends of Syria meeting in Paris in July, the number of people killed has risen from 16,000 to more than 42,000, the Britain-based Syrian Observatory for Human Rights says.

Al-Qaeda in Iraq has carried out scores of massive bombings aimed at Shiite civilians and regularly targeted US forces before their withdrawal a year ago.

The Treasury Department also sanctioned two armed militia groups supporting the Assad regime -- Jaysh al-Sha'bi and Shabiha -- as well as two Shabiha commanders.

The United States "will target the pro-Assad militias just as we will the terrorists who falsely cloak themselves in the flag of the legitimate opposition," said David Cohen, under-secretary for terrorism and financial intelligence.

The Treasury Department said the militias have been "instrumental in the Asad regime's campaign of terror and violence against the citizens of Syria."

Nuland warned the US may target other groups. "There's a lot of morphing and changing within these militia groups," she said. "What we are saying is this is a false flag that we can identify and beware."

-AFP/ac

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Disclose Swamy's letter to Kalam after consulting him: CIC

NEW DELHI: The Central Information Commission (CIC) has directed the President's Secretariat to make Janata Party chief Subramanian Swamy's letter to former President Dr A P J Abdul Kalam public after consulting him. Swamy had written to Kalam after the 2004 election which UPA had won.

In the letter Swamy had raised doubts on if Congress president Sonia Gandhi's candidature would be accepted by the courts as it was unclear whether she had renounced her Italian citizenship as stipulated under the Citizenship Act.

Activist Subhash Agrawal had sought a copy of the letter from the President's office, which had turned down his application earlier this year, saying the disclosure would be a breach of confidentiality and fiduciary relationship and therefore attracts Sec 8(1)(e) of RTI Act.

After hearing the matter, Chief Information Commissioner (CIC) Satyananda Mishra ordered to disclose, "the information... relating to the letter written by Subramanian Swamy to the then President on the formation of the Council of Ministers after following the procedure laid down in Section 11 of the Right to Information Act, if the CPIO considers such consultation necessary."

"No records are available in this regard," the Secretariat had said to a question on whether it was true that certain individuals, political parties or anyone else had objected against some particular person being invited to form the government in 2004.

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APNewsBreak: DA investigating Texas cancer agency

AUSTIN, Texas (AP) — The Texas prosecutor responsible for investigating public corruption among state officials said Tuesday that he has opened an investigation into the state's troubled $3 billion cancer-fighting agency.

Gregg Cox, director of the Travis County district attorney's public integrity unit, told The Associated Press that an investigation has begun into the Cancer Prevention and Research Institute of Texas. The agency also is under investigation by the Texas attorney general's office after an $11 million grant to a private company did not receive the proper review.

Cox said his unit, which prosecutes crimes related to the operation of state government, is beginning its investigation not knowing "what, if any, crime occurred" at CPRIT.

His announcement came on the same day that CPRIT said its executive director had submitted his resignation letter and amid escalating scrutiny over the management of the nation's second-biggest pot of cancer research dollars.

CPRIT has not been able to focus on fighting the disease due to "wasted efforts expended in low value activities" during the past tumultuous eight months, Executive Director Bill Gimson wrote in a resignation letter dated Monday. Gimson offered to stay on until January, and the agency's board must still approve his request to step down.

Gimson has led the state agency since it launched in 2009. But he fell under mounting criticism over the recent disclosure that an $11 million award to a private company was never reviewed. It was the second time this year that a lucrative taxpayer-funded grant instigated backlash and raised questions about oversight.

"Unfortunately, I have also been placed in a situation where I feel I can no longer be effective," Gimson wrote.

The Texas attorney general's office has said it is looking into CPRIT's $11 million grant to Dallas-based Peloton Therapeutics. An internal audit performed by the agency revealed that Peloton's proposal was approved for funding in 2010 without being reviewed by an outside panel.

Gimson said last week that Peloton's funding was the result of an honest mistake that happened when the agency was still young and in the process of installing checks and balances. Agency emails surrounding the Peloton grant are no longer available, Gimson said, and state investigators said they will work to find them.

Only the National Institutes of Health doles out more cancer research dollars than CPRIT, which has awarded more than $700 million so far. The agency's former chief science officer, Nobel laureate Alfred Gilman, resigned earlier this year over a separate $20 million award that Gilman claimed received a thin review. That led some of the nation's top scientists to accuse the agency of charting a politically-driven path.

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Follow Paul J. Weber on Twitter: www.twitter.com/pauljweber

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Serial Killer 'Broke Own Rule,' Lost Control

Serial killer Israel Keyes' capture was his own undoing. It was the meticulous murderer's loss of control and violation of his own careful rules of murder that ended years of traveling to kill for fun.

When Keyes, 34, approached an Anchorage coffee stand Feb. 1, he told himself that if the person working inside did not have her own car, he would only rob the place and leave.

But when he approached and found teenage barista Samantha Koenig by herself, he couldn't help himself, Keyes told police. He dragged her out, into his own car, raped her, strangled her and was eventually arrested for her murder.

"In prior cases, he had enough self-control to walk away from it, to not commit the kidnapping, to not commit the abduction and with Samantha he didn't," Anchorage homicide Det. Monique Doll said Monday. "He broke his own rule. He had drawn his line in the sand and he couldn't help himself, he said. He took her anyway."

The arrest of Keyes on March 12 ended more than a decade of traveling around the country to find victims to kill or to prepare for future crimes by burying murder kits of weapons, cash and tools to dispose of bodies. Since March he had been slowly telling police about his hidden life and how he operated. But the tale abruptly ended when Keyes committed suicide in his jail cell on Dec. 1.

Police are now left trying to fill in the details of his vicious life. Police believe he killed between 8 and 12 people, including Koenig, but only three victims have been definitively tied to Keyes so far.

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Before his jail cell suicide, Keyes gave authorities some clues on how he managed to remain undetected for so long.

"He basically had this rule, this unwritten rule, that he would travel outside and go to great lengths to distance himself from any of his victims," Doll said. "He told us he was losing control. He was losing the massive amount of self-control that he had."

Koenig's abduction broke Keyes' rules on two levels. First, she was in Anchorage, which was also Keyes' home. Second, she did not have her own vehicle.

"Mr. Keyes told us that he was deciding as he walked up the coffee kiosk that if the person working inside did not have a vehicle he was only going to rob the [place] and walk away because he did not want to transport his victim in his vehicle," Doll said.

Keyes quickly discovered that Koenig did not have a car, but when he saw her, his desire to kill overpowered his discipline.

This admission was among many startling revelations Keyes made over about 40 hours of interviews with police in which he discussed topics ranging from torturing animals as a child to the way he fantasized his own death.

"He didn't plan on being taken alive," Anchorage Police Officer Jeff Bell said at the news conference.

Keyes envisioned himself being caught robbing a bank and dying in a police shootout, Bell said. For this reason, he would bring two guns with him to bank robberies--the gun used to rob the bank and a second gun hidden in his coat with 100 rounds for a shootout.

Keyes also talked about his interest in serial killers, though he was adamant about not being called a serial killer.

"He had researched and read other serial killers. He knew a lot about Ted Bundy," Doll said. "He was very careful to say that he had not patterned himself after any other serial killers, that his ideas were his own. He was very clear about that distinction. That mattered a lot to him."

"He never identified himself as a serial killer," she said. "That was one of the things that he wanted very much, as this investigation progressed, to keep from being identified as."

Doll said Keyes was interested in suspense and crime movies and books, which he said he enjoyed because he recognized himself in the characters in a way that he could never talk about.

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Egypt army seeks national unity as crisis mounts

CAIRO (Reuters) - Egypt's army chief called for talks on national unity to end the country's deepening political crisis after a vital loan from the IMF was delayed and thousands of pro- and anti-government demonstrators took to the streets.

The meeting, scheduled for Wednesday afternoon, was called in response to a destabilizing series of protests since President Mohamed Mursi awarded himself sweeping powers on November 22 to push through a new constitution shaped by his Islamist allies in a referendum on Saturday.

"We will not speak about politics nor about the referendum. Tomorrow we will sit together as Egyptians," armed forces chief and Defense Minister Abdel Fattah al-Sisi said at a joint gathering of army and police officials.

An aide said Mursi had supported the call for talks. The Muslim Brotherhood announced it would be there, while the main opposition coalition said it would decide on Wednesday morning whether to attend.

Earlier, the finance minister disclosed that a $4.8 billion International Monetary Fund loan, a cornerstone of Egypt's economic recovery hopes, would be delayed until next month.

Mumtaz al-Said said the delay was intended to allow time to explain a widely criticized package of economic austerity measures to the Egyptian people.

On Monday Muris backed down on planned tax rises, seen as essential for the loan to go ahead, but which the opposition had fiercely criticized.

"Of course the delay will have some economic impact, but we are discussing necessary measures (to address that) during the coming period," Said told Reuters, adding: "I am optimistic ... everything will be well, God willing."

Prime Minister Hisham Kandil said the measures would not hurt the poor. Bread, sugar and rice would not be touched, but prices of cigarettes and cooking oil would go up and fines would be imposed for public littering. In a bid to rebuild consensus, he said there would be a public consultation about the program next week.

In Washington, the IMF said Egypt had asked for the loan to be postponed "in light of the unfolding developments on the ground". The Fund stood ready to consult with Egypt on resuming discussions on the stand-by loan, a spokeswoman said.

GUNMEN OPEN FIRE

On the streets of Cairo, tensions ran high after nine people were hurt when gunmen fired at protesters camping in Tahrir Square, according to witnesses and Egyptian media.

The opposition has called for major protests it hopes will force Mursi to postpone the referendum. Thousands gathered outside the presidential palace, whose walls are scrawled with anti-Mursi graffiti.

A bigger crowd of flag-waving Islamist Mursi backers, who want the vote to go ahead as planned on Saturday, assembled at a nearby mosque, setting the stage for further street confrontations in a crisis that has divided the nation of 83 million.

In Egypt's second city of Alexandria, thousands of rival demonstrators gathered at separate venues. Mursi's backers chanted: "The people want implementation of Islamic law", while his opponents shouted: "The people want to bring down the regime". Others cities also witnessed protests.

The upheaval following the fall of Hosni Mubarak last year is causing concern in the United States, which has given Cairo billions of dollars in military and other aid since Egypt, the Arab world's most populous nation, made peace with Israel in 1979.

State Department spokeswoman Victoria Nuland emphasized "deep concerns" over the situation in Egypt and repeated calls on protesters to demonstrate peacefully and on security forces to act with restraint.

"Key stakeholders in Egypt are raising real and legitimate questions, both about the substance and about the process for moving to a constitutional referendum this weekend," Nuland told a news briefing. She declined to be drawn on whether Washington believed the referendum itself should be postponed.

The turmoil has also put a big strain on the Egyptian economy, sending foreign currency reserves down to about $15 billion, less than half what they were before the revolt two years ago as the government has sought to defend the pound.

"Given the current policy environment, it's hardly a surprise that there's been a delay, but it is imperative that the delay is brief," said Simon Williams, HSBC economist in Dubai. "Egypt urgently needs that IMF accord, both for the funding it brings and the policy anchor it affords."

The IMF deal had been seen as giving a seal of approval to the government's economic plans, vital for drawing more cash into the economy to ease a crushing budget deficit and stave off a balance of payments crisis.

MASKED ATTACKERS

In central Cairo police cars surrounded Tahrir Square, the first time they had appeared in the area since shortly after Mursi awarded himself the sweeping temporary powers in a move that touched off widespread protests.

The attackers, some masked, also threw petrol bombs that started a small fire, witnesses said.

"The masked men came suddenly and attacked the protesters in Tahrir. The attack was meant to deter us and prevent us from protesting today," said John Gerges, a Christian Egyptian who described himself as a socialist.

The latest bout of unrest has so far claimed seven lives in clashes between the Muslim Brotherhood and opponents who gathered outside Mursi's presidential palace.

But the Republican Guard, which protects the palace, has yet to use force to keep protesters away from the building, now ringed with tanks, barbed wire and concrete barricades.

The army has told all sides to resolve their differences through dialogue. For the period of the referendum, the army has been granted powers by Mursi allowing it to arrest civilians.

In statement issued after rights groups criticized the army's new police powers, the presidency said anyone arrested by the military during the referendum would face civil rather than military courts. It said the army's new role would only last until results are declared after Saturday's referendum.

Leftists, liberals and other opposition groups say the hastily arranged constitutional referendum is polarizing the country and could put it in a religious straitjacket.

Islamists have urged their followers to show support for Mursi and for a referendum they feel sure of winning.

(Additional reporting by Tamim Elyan and Edmund Blair in Cairo, and Andrew Quinn in Washington; Writing by Giles Elgood; Editing by Will Waterman and David Stamp)

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