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)
Egypt army seeks national unity as crisis mounts
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Egypt army seeks national unity as crisis mounts
