Egypt Protesters Draw Strength From Deadline Rebuffed

July 3 (Bloomberg) -- Egyptian billionaire Naguib Sawiris discusses the protests against President Mohamed Mursi. He speaks by phone with Francine Lacqua and Guy Johnson on Bloomberg Television's "The Pulse." (Source: Bloomberg)

Egypt’s political showdown escalated as hundreds of thousands massed to demand the departure of President Mohamed Mursi, even as he rebuffed a military ultimatum to restore order or have it imposed by the army.

Adding to the turmoil were vows by Mursi’s Islamist supporters to stand firm against what they saw as a threat of a military coup. The armed forces pledged yesterday to impose its own plan if Mursi didn’t end Egypt’s political crisis within 48 hours, to his opponents’ delight.

The deadline signaled that the military, like the opposition, had lost patience with a government critics blame for the polarization that has marred Egypt’s transition from Hosni Mubarak’s autocratic rule. It was issued a day after vast crowds demonstrated nationwide to demand his ouster and early elections. The June 30 Front, an amalgam of opposition groups, named Nobel Laureate Mohamed ElBaradei to represent them in talks about the country’s future. Three more senior officials resigned from the administration’s ranks.

The presidency said it wasn’t consulted before the military statement and would press ahead with national reconciliation efforts. Those bids so far have only galvanized protests demanding that Mursi quit, drawing crowds unprecedented since Mubarak’s 2011 overthrow. The tumult has sent Egypt’s economy reeling, with default swaps at a record high.

Photographer: Mohamed El-Shahed/AFP/Getty Images

A protester lights up a flare as hundreds of thousands of Egyptian demonstrators gather in Tahrir Square during a protest calling for the ouster of President Mohamed Morsi in Cairo on July 1, 2013. Close

A protester lights up a flare as hundreds of thousands of Egyptian demonstrators gather... Read More

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Photographer: Mohamed El-Shahed/AFP/Getty Images

A protester lights up a flare as hundreds of thousands of Egyptian demonstrators gather in Tahrir Square during a protest calling for the ouster of President Mohamed Morsi in Cairo on July 1, 2013.

Freely Elected

Clashes between Mursi supporters and opponents broke out in Alexandria, Giza and Banha, state media reported, while Al-Jazeera Mubashir Misr said that a headquarters for the Brotherhood’s Freedom and Justice Party in Fayoum was stormed.

Mursi’s “days as Egypt’s president are probably numbered,” Eurasia Group Mideast analyst Hani Sabra said in e-mailed comments. “While there is still an opportunity for a negotiated settlement, it is becoming less likely.”

The military’s plunge into the rift between the Islamist president and his opponents coincided with Mursi’s first anniversary in office -- a year detractors paint as one of turmoil, deepening poverty and sectarian violence.

If Mursi “is a real patriot, he would step down, allow for new elections,” Egyptian billionaire Naguib Sawiris told Bloomberg TV today. “By staying against the will of the people, he’s just driving the country into a civil war.”

Spokesmen Resign

The loss of faith in Mursi was underscored today by a series of defections. His two spokesmen, both veteran diplomats, resigned, said a senior foreign ministry official, speaking on condition of anonymity because he was not authorized to disclose they quit. So did the Cabinet spokesman, Ahram Gate reported, joining at least five ministers who have resigned.

The state-run Middle East News Agency reported that Prime Minister Hisham Qandil presided over a Cabinet session that did not include the nation’s top security officials, the defense and interior ministers. It was the defense minister, Abdelfatah Al-Seesi, who issued the military’s ultimatum.

Egypt’s highest appellate court upheld an ruling annulling the appointment of Mursi’s choice for prosecutor-general. The firing of the Mubarak-era prosecutor, Abdel-Meguid Mahmoud, had angered Mursi’s critics who saw it as part of the Islamist’s attempt to usurp power.

For Mursi’s supporters, this week’s protests and the military’s ultimatum are an illegitimate attempt to depose a democratically elected president. The National Coalition for Legitimacy, an Islamist group made up of the Muslim Brotherhood and its allies, called for counter-protests.

‘Dead Bodies’

“We swear to God, we won’t allow any coup against legitimacy, except over our dead bodies,” Mohamed El-Beltagy, a senior Muslim Brotherhood official, declared yesterday in Raba’a El-Adaweyya square, where Mursi supporters have been holding counter-rallies. “Each of us must call his family and relatives and tell them get ready for the most sacred mission in Egypt’s history.’

‘‘Are you ready for martyrdom?” he asked the supporters, drawing cheers of “God is Great.”

At least 14 deaths have been reported nationwide since the opposition rallies began on June 30, according to Health Ministry officials. Yesterday, protesters stormed the Muslim Brotherhood headquarters in Cairo, setting its first floor ablaze. Clashes erupted between the two sides in the port city of Suez, though the unrest has not affected transit through the Suez Canal, a major conduit for oil.

Plot Warning

The Brotherhood moved quickly to distance itself from the prospect of violence from its side. In an e-mailed statement today it warned of a plot to attack protesters and lay blame on the Islamist group to whip up strife. It urged all to work together for the nation’s interests.

The armed forces said yesterday the deadline was a “last chance” and that it would impose its own blueprint for the future if the people’s demands weren’t met. Mursi opponents were jubilant. Fireworks lit up the sky in Cairo and hundreds of thousands celebrated in Tahrir, the focal point of the nationwide protests.

Hours later, the military downplayed talk of a coup, saying it only wanted to push for a quick resolution to the current crisis.

Stocks Rise

The unrest has roiled the economy, with Egypt’s default risk soaring to a record 900 basis points yesterday, and climbing 261 basis points in June, according to data compiled by Bloomberg. The monthly advance was four times more than that on Middle East contracts, which rose by an average 64 basis points to 331. The surge took Egypt’s five-year credit default swaps above those of similarly rated Pakistan.

The military’s statement, however, appeared to offer investors a glimmer of hope. Egypt’s stock index headed for the biggest gain in a year, with the EGX 30 Index jumping 4.9 percent, to 4,986.81 in Cairo. That gain pared the measure’s 2013 drop to 8.7 percent. Five-year contracts that protect against an Egyptian default tumbled 50 basis points, the most since May, to 850, according to CMA.

Another deadline announced by Mursi’s opponents, elapsed ahead of the military’s. Critics called for a campaign of civil disobedience should Mursi fail to meet protesters’ demands by 5 p.m. today. Even the ultraconservative Salafi Nour Party urged Mursi to set a date for early presidential elections, Ahram Online reported.

“Asking Mursi to resign is not against democratic procedures,” Khaled Dawoud, a spokesman for the NSF, said in e-mailed comments today, arguing that the goals of the uprising against Mubarak had not been met. Mursi and the Muslim Brotherhood “took the country in another direction that mainly reflected their desire to dominate the state, and did not build a democracy” or improve the lives of Egyptians.

To contact the reporters on this story: Mariam Fam in Cairo at mfam1@bloomberg.net; Tarek El-Tablawy in Cairo at teltablawy@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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