* Brotherhood says may reconsider talks
* Protesters dig in at tent city in central Cairo
* New cabinet holds first meeting
* U.S. may have softened position on Mubarak
(Releads with Brotherhood official)
By Yasmine Saleh and Andrew Hammond
CAIRO, Feb 7 (Reuters) - Egypt's Muslim Brotherhood said on
Monday it could pull out of talks with the government if
opposition demands were not met, including the immediate exit of
President Hosni Mubarak who on Monday chaired a cabinet meeting.
Mubarak, 82, who refuses calls to end his 30-year-old rule
before September polls, saying his resignation would cause chaos
in the Arab world's most populous nation, has tried to focus on
restoring order and his government seems to be buying time.
Protesters, barricaded in a tent camp in Tahrir Square in
the heart of Cairo, have vowed to stay until Mubarak quits and
hope to take their campaign to the streets with more mass
demonstrations on Tuesday and Friday.
Keen to get traffic moving around Tahrir Square, the army
tried early on Monday to squeeze the area the protesters have
occupied. Overnight campers rushed out of their tents to
surround soldiers attempting to corral them into a smaller area.
The powerful army's role in the next weeks is considered
critical to the future of Egypt.
"The army is getting restless and so are the protesters. The
army wants to squeeze us into a small circle in the middle of
the square to get the traffic moving again," protester Mohamed
Shalaby, 27, told Reuters by telephone.
The uprising, which some activists have called the "Nile
Revolution", may have cost 300 lives so far, according to the
The opposition has been calling for the constitution to be
rewritten to allow free and fair presidential elections, a limit
on presidential terms, the dissolution of parliament, the
release of political detainees and lifting of emergency law.
"We are assessing the situation. We are going to reconsider
the whole question of dialogue," the Brotherhood's Essam
el-Erian told Reuters on Monday. "We will reconsider according
to the results. Some of our demands have been met but there has
been no response to our principal demands that Mubarak leave".
The Muslim Brotherhood movement was among the groups that
met Egyptian government officials at the weekend, a sign of how
much has already changed in an uprising that has rocked the Arab
world and alarmed Western powers.
The presence at the weekend talks of the banned movement,
whose members have for years been repressed by Mubarak's feared
security forces, was a significant development that would have
been unthinkable before the uprising.
The Brotherhood is seen as by far the best organised
opposition group, whose potential rise to power troubles Egypt's
Opposition figures reported little progress in the talks.
While protesters worry that when Mubarak does leave, he will be
replaced not with the democracy they seek but with another
The government issued a statement after a first round of
talks on Sunday and said there was agreement on a road map for
talks, which gave little ground on many opposition demands.
It suggested reforms would be implemented with Mubarak
staying in power until September. It also put conditions on
lifting emergency law, which the opposition says has been used
to stifle dissent and should end immediately.
Mubarak's new cabinet pledged on Monday to keep subsidies
and draw in foreign investment in its first meeting since the
uprising against poverty, high prices and an end to Mubarak's
With a government pledging to reform, an opposition with
limited political experience, a constitutional process that
mitigates against haste, and a key strategic role, Egypt's next
steps must be considered carefully, U.S. officials say.
The opposition has made big gains in the past two weeks.
Mubarak has said he will not run again for president, his
son has been ruled out as next in line, a vice president has
been appointed for the first time in 30 years, the ruling party
leadership has quit and the old cabinet was sacked.
Perhaps more important, protesters now take to the streets
almost with impunity in their hundreds of thousands. Before Jan.
25, a few hundred would have met a crushing police response in
this U.S. ally whose army receives $1.3 billon in aid annually.
OVER THE HORIZON
Appearing to soften her position for Mubarak to step down,
U.S. Secretary of State Hillary Clinton has said her policy on
Egypt looks "over the horizon" to its possible democratic future
-- a future that must be carefully planned.
The cautious U.S. approach to the unrest shaking its
strategic Middle East partner has come at a cost, putting the
Obama administration out of step with the protesters who say
Mubarak must quit now for serious political talks to take place.
As allies coalesced around the U.S. position, German
Chancellor Angela Merkel's spokesman Steffen Seibert said it was
clear that the Mubarak era was in its final phase and there
would be other leaders.
"That is what's important for us, that this new direction is
clear and irreversible," he said, adding: "It's not so important
that individual people resign or whether there is a competition
to have the quickest possible election."
Egypt's government tried to get the country back to normal
when the working week began on Sunday. Banks reopened after a
week-long closure with lines of customers accessing accounts but
hours, and withdrawals, were limited. Schools remained shut.
Several major Egyptian business concerns resumed business.
In another move to restore normality, authorities shortened
the curfew, largely ignored by the hard-core protesters, to
start at 8 p.m. and end at 6 a.m..
Many Egyptians, including those who took part in nationwide
demonstrations last week against Mubarak, are keen to get back
to work and are worried about the effects of the crisis on
stability, the economy and the important tourism sector.
Egypt's pound weakened to a six-year low on the second day
of trade after a week-long closure. State-controlled banks
seemed to be selling dollars to support the pound.
"Things are stable. I can't say they're good, but they're
not collapsing," said a trader at a Cairo-based bank.
(Reporting by Samia Nakhoul, Dina Zayed, Marwa Awad, Shaimaa
Fayed, Alexander Dziadosz, Yasmine Saleh, Sherine El Madany,
Jonathan Wright, Andrew Hammond, Tom Perry and Alison Williams
in Cairo; Erika Solomon in Dubai, Writing by Peter Millership
and Diana Abdallah)
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