(Corrects date in second paragraph to July 8.)
July 10 (Bloomberg) -- Egypt’s parliament speaker Saad El-Katatni called on the assembly to reconvene today after President Mohamed Mursi overturned a decision by the country’s top generals and judges to dissolve the legislative body.
Mursi’s decree, issued July 8, also says parliamentary elections will be held within 60 days of the approval of a new constitution in a referendum. The charter has yet to be drafted. The benchmark stock index tumbled 4.2 percent, the biggest intraday drop since June 19, at the close in Cairo yesterday.
The president’s move comes after the military council last month decided to retain legislative powers following a high court ruling that the law governing voting for the Islamist-controlled parliament was unconstitutional.
Egypt’s constitutional court said yesterday its rulings which led to the dissolving of parliament are final and binding, after meeting to examine appeals filed to stop Mursi’s order. In addition, the military leaders said in a statement yesterday that they are confident that “all state institutions” will respect the court’s ruling, according to the state-run Middle East News Agency.
The power struggle between the president, an Islamist politician, and the Supreme Council of the Armed Forces, known as SCAF, threatens to deepen divisions in a country struggling to recover from the unrest that followed last year’s uprising against Hosni Mubarak.
“What we’re seeing is yet another round inside the country about how to restructure power in a major way,” Brian Katulis, a senior fellow at the Center for American Progress in Washington, said yesterday. “I don’t know what Mursi’s legal authority is to reinstate the parliament, but the military has had a great deal of autonomy and that will likely decline over time.”
A confrontation between Mursi and the military “is an illusion,” Essam El-Erian, deputy chairman of the Brotherhood’s Freedom and Justice Party, said in a telephone interview yesterday.
The Freedom and Justice Party won almost half of the seats in the legislature in elections this year. Together with the Salafi Nour Party, Islamists controlled more than two-thirds of the assembly. Mursi won a narrow majority of votes in a presidential runoff last month.
“You’ve got a president with a slim popular mandate but a potential for confrontation with the army and the courts,” Richard Odumodu, London-based portfolio manager at Silk Invest Ltd., said by phone. “The courts can say one thing, the president can say another thing and SCAF can say another thing, but it’s how these things are perceived, most importantly by the Egyptian people and international investors, that’s adding to the pressure.”
Egypt’s troubled transition after Mubarak’s ouster has prompted international investors, including Silk Invest, to sell their holdings of government securities, causing borrowing costs to surge to record levels.
Economists at HSBC Holdings Plc, Bank of America Merrill Lynch and Standard Chartered Plc had predicted that the power struggle may further delay a $3.2 billion loan agreement with the International Monetary Fund needed to unlock external financing to lower record government borrowing costs and help foreign reserves recover from the worst decline in seven years.
Net international reserves were little changed in June at $15.5 billion after an increase in gold holdings made up for a drop in foreign currencies, according to central bank data released yesterday.
U.S. President Barack Obama is likely to “encounter” Mursi in New York during the September meeting of the United Nations General Assembly, White House spokesman Jay Carney said yesterday in Washington. No formal meeting has been scheduled at this time, he said.
The Egyptian leader met yesterday in Cairo with U.S. Deputy Secretary of State William Burns.
Burns had a “very constructive meeting” with Mursi, during which he “underscored the U.S. commitment to building a new partnership with a new, democratic Egypt,” according to an e-mailed statement from the State Department. “In his meetings, he also stressed the U.S. commitment to tangible initiatives to help Egypt meet its pressing economic concerns, including creating jobs and encouraging investment.”
He also stressed the importance of Mursi and the new government taking an inclusive approach going forward, upholding respect for the rights of women and Egyptians of all faiths, according to the statement.
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