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Egypt Seeks Reconciliation Talks as Clashes Kill Seven

Photographer: Carsten Koall/Getty Images

Supporters of the Muslim Brotherhood and of ousted Egyptian President Mohamed Mursi demonstrate at a rally in Cairo, on July 15, 2013. Close

Supporters of the Muslim Brotherhood and of ousted Egyptian President Mohamed Mursi... Read More

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Photographer: Carsten Koall/Getty Images

Supporters of the Muslim Brotherhood and of ousted Egyptian President Mohamed Mursi demonstrate at a rally in Cairo, on July 15, 2013.

Islamist supporters of Egypt’s deposed President Mohamed Mursi clashed with security forces outside the Cabinet building in Cairo today after rejecting the new interim government and its offer of reconciliation talks.

Mursi backers called for new protests today after deadly violence at rallies earlier this week laid bare the deepening divisions marring the transition from Mursi’s rule. The Muslim Brotherhood’s Freedom and Justice party, from which Mursi hails, sees the Cabinet sworn in yesterday as “illegitimate” and built “on the blood of martyrs,” spokesman Hamza Zawba said by phone, rejecting the invitation to talks.

The secularist-dominated Cabinet led by Prime Minister Hazem El-Beblawi, an economist and former finance minister, has been charged with restoring order and kickstarting an economy caught in its worst slump since the overthrow of longtime leader Hosni Mubarak in 2011. Making the task more challenging is the opposition it faces from Mursi supporters who say he was a victim of a July 3 “coup.”

“The Muslim Brotherhood seems to believe that through the protests, it will ultimately undermine the military-appointed government,” said Crispin Hawes, head of the Middle East program at the New York-based Eurasia Group, which monitors political risk. “The continuing instability only polarizes the country more.”

Violent Divide

The divide between Islamists and secularists is growing deeper and increasingly violent. Hours before the Cabinet was sworn in, seven people died and hundreds were injured at pro-Mursi rallies. Last week, at least 50 Mursi supporters were killed in fighting with the army. Arrests of Brotherhood leaders and other Islamists, and the freezing of funds, have only inflamed Mursi’s supporters further. Violence and the Islamists’ rejection of reconciliation talks sent Egypt’s default risk climbing.

Outside the Cabinet today, about 300 of Mursi’s backers scuffled with security forces, Hany Girgis, head of Cairo’s Qasr El-Nil police station, said by phone. No casualties were immediately reported.

Human rights group Amnesty International said Mursi supporters arrested by Egyptian authorities reported that they were beaten, subjected to electric shocks and hit with rifle butts.

“At this time of extreme polarization and division, it is more important than ever that the office of the Public Prosecutor demonstrates that it’s truly independent and not politicized,” Hassiba Hadj Sahraoui, deputy director, Middle East and North Africa program, said on Amnesty’s website today.

Default Risk

Five-year credit default contracts rose 25 basis points today to 700, according to data provider CMA, taking the increase this week to 44 basis points. The yield on the government’s benchmark 5.75-percent bonds due in 2020 added six basis points to 8.53 percent, the highest on a closing basis in a week.

The position of Mursi’s backers shows “that the problem was not resolved and that the road map that the military is trying to enforce is not working,” said Omar Ashour, a senior lecturer in Middle East politics at the University of Exeter and a fellow at the Brookings Doha Center.

The military sought again to reassure Egyptians it was not seeking a political role after deposing Mursi. “We have affirmed before that the future of the Egyptian state will include all sides and exclude no one,” military spokesman Ahmed Mohammed Ali told the Al Arabiya satellite channel.

Reconciliation Overture

Officials from the Brotherhood’s party and the ultraconservative Salafi Nour Party, the only Islamist group to back the military ouster of Mursi, rejected the offer of Cabinet posts.

Egypt’s bid for a $4.8 billion International Monetary Fund loan remains uncompleted two years after it was started. That’s in part because the Washington-based lender sought political consensus and a clear economic plan -- two elements Mursi’s government could not provide.

“It is difficult to see how the government will honestly address the economic situation,” Hawes said.

Unemployment is at a record high and foreign reserves are less than half their levels in December 2010. Persian Gulf countries have pledged $12 billion in aid since Mursi’s ouster.

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

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

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