The debacle has cast a shadow over the action, which will see Michael Phelps and Ryan Lochte square off for the final time in the pool, with Phelps, once again, vying to become the first male swimmer to win the same individual event at three Olympics.

The sight of four doubles teams spraying hopeless shots into the net and beyond the lines disgusted a jeering crowd of 4,800 packed into Wembley Arena to see badminton’s finest and forced the sport’s governing body to kick them out.

As top seeds, the Chinese duo would have stood a good chance of adding to China’s medal tally. They already head the table with 17 golds after five days of competition, ahead of the United States on 12 and South Korea on six.

Hosts Britain are hoping the rowers and cyclists will build on the two golds won on Wednesday that lifted the spirits of a nation starting to doubt whether any of the faces of the Games would manage to convert the dreams into a podium topping finish.

With the headline writers finally able to let rip, Britain’s newspapers went into overdrove. Tabloid headlines blared “Golden wonder”, “Gold rush”, “GOOOOOOOOOOOLD!” at Bradley Wiggins storming the cycling time trial and rowers Helen Glover and Heather Stanning obliterating the field in the women’s pair.

In contrast, Chinese officials have told their players to make a public apology after the antics of the duo, two Korean teams and an Indonesian pairing trying to take advantage of a change in the rules were beamed around the globe.

“This is my last competition. Goodbye Badminton World Federation (BWF), goodbye my beloved badminton,” Yu wrote on her Tencent microblog. “We … only chose to use the rules to abandon the match.”

“You have heartlessly shattered our dreams,” Yu added. “It’s that simple, not complicated at all. But this is unforgivable.”

SPIRIT OF SPORT

The shockwaves from Tuesday evening’s badminton debacle have reverberated round the Games, putting the focus squarely on match officials and calling the spirit of sport into question.

Olympic judges and referees came under fire on Wednesday with one boxer accusing them of “a fix”, another successfully appealing a loss and even boxing great Lennox Lewis questioning some of their calls.

Iran’s Ali Mazaheri cried foul when the heavyweight was disqualified after being warned three times for persistent holding against Cuban Jose Larduet Gomez despite leading by two points going into the second round.

“It was a fix. I could have got a bronze easily if it hadn’t been for that,” an irate Mazaheri, who walked out of the ring before the decision was officially announced, told reporters through a translator.

Earlier, China’s Ding Ning sobbed and also accused an umpire of ruining her Olympic dream when she lost the table tennis gold medal to compatriot Li Xiaoxia after being punished with penalty points in a tense and tetchy encounter.

The gladiatorial combat will resume on Thursday, when the track cycling action gets under way and swimmers Phelps and Lochte slug it out for one last time in the evening.

The two Americans teamed up on Tuesday in the squad that crushed the rest of the field in the 4×200 meters freestyle relay to give Phelps his 19th Olympic medal, an all-time record.

DUEL IN THE POOL

The duo now go head to head in the 200 individual medley – a final tantalizing clash before Phelps retires.

Lochte drew first blood in London by winning the 400 version on Saturday, pushing Phelps into fourth place.

Phelps is bidding again for the elusive feat of becoming the first male swimmer to win the same event at three successive Olympics.

“We love racing against each other,” he said. “Neither one of us likes to lose. I like to say we bring out the best in one another.”

Olympic track cycling action gets under way with Britain’s Victoria Pendleton, a nine-times world champion, renewing her battle with Australia’s Anna Meares and hoping to end her career on a high on home soil.

With Germany holding the world titles in both team sprints, the hosts will be hard pressed to repeat their showing in Beijing where they won seven of 10 possible golds.

But they will draw inspiration from Wiggins who followed victory in last month’s Tour de France by running away with the time trial, 42 seconds ahead of Germany’s Tony Martin.

Casting a shadow over the start of the action in the velodrome, which is bound to draw thousands of fans buoyed by Britain’s emergence as a cycling superpower, a cyclist was killed in a collision with an Olympic media shuttle bus in east London on Wednesday evening.

The 28-year-old was pronounced dead at the scene of the accident. Police arrested a man, aged in his mid-60s, on suspicion of causing death by dangerous driving. He was released on bail the pending further inquiries until late August.

Shuttle buses have been transporting thousands of journalists covering the Games between the Olympic Park in Stratford and central London.

(Editing by Matt Falloon)

The debacle has cast a shadow over the action, which will
see Michael Phelps and Ryan Lochte square off for the final time
in the pool, with Phelps, once again, vying to become the first
male swimmer to win the same individual event at three Olympics.

The sight of four doubles teams spraying hopeless shots into
the net and beyond the lines disgusted a jeering crowd of 4,800
packed into Wembley Arena to see badminton’s finest and forced
the sport’s governing body to kick them out.

As top seeds, the Chinese duo would have stood a good chance
of adding to China’s medal tally. They already head the table
with 17 golds after five days of competition, ahead of the
United States on 12 and South Korea on six.

Hosts Britain are hoping the rowers and cyclists will build
on the two golds won on Wednesday that lifted the spirits of a
nation starting to doubt whether any of the faces of the Games
would manage to convert the dreams into a podium topping finish.

With the headline writers finally able to let rip, Britain’s
newspapers went into overdrove. Tabloid headlines blared “Golden
wonder”, “Gold rush”, “GOOOOOOOOOOOLD!” at Bradley Wiggins
storming the cycling time trial and rowers Helen Glover and
Heather Stanning obliterating the field in the women’s pair.

In contrast, Chinese officials have told their players to
make a public apology after the antics of the duo, two Korean
teams and an Indonesian pairing trying to take advantage of a
change in the rules were beamed around the globe.

“This is my last competition. Goodbye Badminton World
Federation (BWF), goodbye my beloved badminton,” Yu wrote on her
Tencent microblog. “We … only chose to use the rules to
abandon the match.”

“You have heartlessly shattered our dreams,” Yu added. “It’s
that simple, not complicated at all. But this is unforgivable.”

SPIRIT OF SPORT

The shockwaves from Tuesday evening’s badminton debacle have
reverberated round the Games, putting the focus squarely on
match officials and calling the spirit of sport into question.

Olympic judges and referees came under fire on Wednesday
with one boxer accusing them of “a fix”, another successfully
appealing a loss and even boxing great Lennox Lewis questioning
some of their calls.

Iran’s Ali Mazaheri cried foul when the heavyweight was
disqualified after being warned three times for persistent
holding against Cuban Jose Larduet Gomez despite leading by two
points going into the second round.

“It was a fix. I could have got a bronze easily if it hadn’t
been for that,” an irate Mazaheri, who walked out of the ring
before the decision was officially announced, told reporters
through a translator.

Earlier, China’s Ding Ning sobbed and also accused an umpire
of ruining her Olympic dream when she lost the table tennis gold
medal to compatriot Li Xiaoxia after being punished with penalty
points in a tense and tetchy encounter.

The gladiatorial combat will resume on Thursday, when the
track cycling action gets under way and swimmers Phelps and
Lochte slug it out for one last time in the evening.

The two Americans teamed up on Tuesday in the squad that
crushed the rest of the field in the 4×200 metres freestyle
relay to give Phelps his 19th Olympic medal, an all-time record.

DUEL IN THE POOL

The duo now go head to head in the 200 individual medley – a
final tantalising clash before Phelps retires.

Lochte drew first blood in London by winning the 400 version
on Saturday, pushing Phelps into fourth place.

Phelps is bidding again for the elusive feat of becoming the
first male swimmer to win the same event at three successive
Olympics.

“We love racing against each other,” he said. “Neither one
of us likes to lose. I like to say we bring out the best in one
another.”

Olympic track cycling action gets under way with Britain’s
Victoria Pendleton, a nine-times world champion, renewing her
battle with Australia’s Anna Meares and hoping to end her career
on a high on home soil.

With Germany holding the world titles in both team sprints,
the hosts will be hard pressed to repeat their showing in
Beijing where they won seven of 10 possible golds.

But they will draw inspiration from Wiggins who followed
victory in last month’s Tour de France by running away with the
time trial, 42 seconds ahead of Germany’s Tony Martin.

Casting a shadow over the start of the action in the
velodrome, which is bound to draw thousands of fans buoyed by
Britain’s emergence as a cycling superpower, a cyclist was
killed in a collision with an Olympic media shuttle bus in east
London on Wednesday evening.

The 28-year-old was pronounced dead at the scene of the
accident. Police arrested a man, aged in his mid-60s, on
suspicion of causing death by dangerous driving. He was released
on bail the pending further inquiries until late August.

Shuttle buses have been transporting thousands of journalists
covering the Games between the Olympic Park in Stratford and
central London.

Mubarak, who has refused calls to step down before September polls, has tried to focus on restoring order.

But protesters, camped out in Tahrir Sqaure in the heart of Cairo, have vowed to stay until Mubarak quits, and hope to take their campaign to the streets on Tuesday and Friday.

The banned Muslim Brotherhood was among the groups who met with officials over the weekend, a sign of how much has already changed in 13 days that have rocked the Arab world and alarmed Western powers.

But opposition figures reported little progress. While protesters are demanding that Mubarak must go immediately, many also worry that when he does go, he will be replaced not with the democracy they seek but with another authoritarian ruler.

Keen to get traffic moving around Tahrir Square, the army tried early on Monday to further squeeze the area the protesters occupied. Protesters rushed out of their tents to surround soldiers attempting to corral them into a smaller area.

Wary of the army’s attempt to gain ground, dozens of protesters have slept inside the tracks of the army’s vehicles.

“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,” Mohamed Shalaby, 27, a protester, told Reuters by phone.

The nation got back to work on Sunday and banks reopened after a week-long crisis with lines of customers seeking access to their accounts.

Many Egyptians, including those who took part in nationwide demonstrations last week against Mubarak’s 30-year rule, are nonetheless desperate to get back to normal and worried about the impact of the crisis on stability and the economy.

The drop in the Egyptian pound was less sharp than many traders had expected on Sunday as the central bank appeared to support the currency.

But the pound could face renewed pressure on Monday when banks outside the Middle East reopen after the weekend.

Another confidence test will be a central bank auction of 15 billion pounds ($2.6 billion) of short-term Treasury bills, postponed from last week. The stock market is still closed.

Government ministers will hold their first full cabinet meeting on Monday since Mubarak reshuffled his cabinet on Jan. 28 in an attempt to mollify protesters enraged by years of corruption, economic hardship and political oppression.

BROTHERHOOD

But it is far from certain that the situation has been defused, despite appeals from longtime Mubarak backer the United States for an “orderly transition” to more democratic rule.

The presence at the talks of the banned Muslim Brotherhood, whose members have for years been repressed by Mubarak’s feared security forces, was a significant development.

The government said after the meeting, chaired by Vice President Omar Suleiman, they agreed to draft a road map for talks, indicating Mubarak would stay in power to oversee change.

It would also move to release jailed activists, guarantee press freedom and lift Egypt’s emergency laws. A committee was set up to study constitutional issues.

But the opposition said the government failed to meet their demand for a complete overhaul of the political system.

Abdel Monem Aboul Fotouh, a senior Brotherhood figure, said the government statement represented “good intentions but does not include any solid changes”.

Opposition activists reject any compromise which would see Mubarak hand over power to Suleiman but also serve out his term — essentially relying on the old authoritarian system to pave the way to full civilian democracy and saving his face.

OBAMA

Nobel peace laureate Mohamed ElBaradei, who has emerged as a figurehead for the opposition coalition, criticised the fledgling negotiations and said he was not invited.

“It is all managed by the military and that is part of the problem.” he told NBC television in the United States.

Gamal Soltan, editor of the al-Mesryoon newspaper, said the protesters would not leave before their demands were met.

“The problem is that the regime’s hesitancy in taking serious steps will lead to complications and the increase of the popular demonstrations and possibly force an army intervention,” he said.

However, former cabinet member Rachid Mohamed Rachid, said: “I believe the presence of Mubarak in the next phase of transition for the next few months is very critical.”

The United States, which had bankrolled Mubarak and the army to the tune of $1.3 billion a year, was taken by surprise by the uprising against a ruler it saw as a bastion against Islamic militancy and a friend, albeit a reluctant one, of Israel.

It has called for gradual change and an orderly transition but has given confused messages about when exactly it thought Mubarak should step down.

In Washington on Sunday, President Barack Obama said he believed Egypt was “not going to go back to what it was”, and that the time for change was now. But in an interview with Fox News, he said only Mubarak knew what he was going to do.

Obama also said he believed the Muslim Brotherhood was only one faction in Egypt and that strains of their ideology were anti-American — comments that could the anger the powerful Islamist group.

(Reporting by Samia Nakhoul, 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 Angus MacSwan; Editing by Myra MacDonald)

The banned Muslim Brotherhood were among the groups who met with officials over the weekend, a sign of how much has already changed in 13 days that have rocked the Arab world and alarmed Western powers.

But opposition figures said their core demand that Mubarak must go immediately was not met. Some expressed concern that the government was playing for time in the hope that Mubarak would hang on until September, when his current term expires.

People in central Tahrir Square, focal point of an uprising that has seen hundreds of thousands of protesters take to the streets and clashes in which an estimated 300 people have been killed, said they would intensify their battle to oust him.

After nightfall Sunday, soldiers fired shots in the air to try to disperse the crowd. But the demonstrators, who on Saturday lay down in front of army tanks, remained and the troops abandoned the attempt.

The nation got back to work Sunday and banks reopened after a week-long crisis with lines of customers seeking access to their accounts.

Government ministers will hold their first full cabinet meeting Monday since Mubarak reshuffled his cabinet on January 28 in an attempt to mollify protesters enraged by years of corruption, economic hardship and political oppression.

But it was far from certain that the situation had been defused, despite appeals from longtime Mubarak backer the United States for an “orderly transition” to more democratic rule.

The presence at the talks of the banned Muslim Brotherhood, whose members have for years been repressed by Mubarak’s feared security forces, was a significant development.

The demonstrators around Tahrir Square, largely young and secular, lack their clear organization and leadership.

The government said after the meeting, chaired by Vice President Omar Suleiman, they agreed to draft a road map for talks, indicating Mubarak would stay in power to oversee change.

It would also move to release jailed activists, guarantee press freedom and lift Egypt’s emergency laws. A committee was set up to study constitutional issues.

But the opposition said the government failed to meet their demand for a complete overhaul of the political system.

Abdel Monem Aboul Fotouh, a senior Brotherhood figure, said the government statement represented “good intentions but does not include any solid changes.”

Opposition activists reject any compromise which would see Mubarak hand over power to Suleiman but also serve out his term — essentially relying on the old authoritarian system to pave the way to full civilian democracy and saving his face.

Nobel peace laureate Mohamed ElBaradei, who has emerged as a figurehead for the opposition coalition, criticized the fledgling negotiations and said he was not invited.

“It is all managed by the military and that is part of the problem.” he told NBC television in the United States.

Gamal Soltan, editor of the al-Mesryoon newspaper, said the protesters would not leave before their demands were met.

“The problem is that the regime’s hesitancy in taking serious steps will lead to complications and the increase of the popular demonstrations and possibly force an army intervention,” he said.

However, former cabinet member Rachid Mohamed Rachid, said: “I believe the presence of Mubarak in the next phase of transition for the next few months is very critical.”

ANTI-AMERICAN

The United States, which had bankrolled Mubarak and the army to the tune of $1.3 billion a year, was taken by surprise by the uprising against a ruler it saw as a bastion against Islamic militancy and a friend, albeit a reluctant one, of Israel.

It has called for gradual change and an orderly transition but has given confused messages about when exactly it thought Mubarak should step down.

In Washington Sunday, President Barack Obama said he believed Egypt was “not going to go back to what it was,” and that the time for change was now. But in an interview with Fox News, he said only Mubarak knew what he was going to do.

Obama also said he believed the Muslim Brotherhood was only one faction in Egypt and that strains of their ideology were anti-American — comments that could the anger the powerful Islamist group.

Thousands of people gathered in Tahrir Square again on Sunday but in the evening, soldiers fired shots in the air in a failed attempt to disperse the crowd.

“The coward is a coward and the brave is a brave and we will not leave the square,” said Sameh Ali, a protester in his 20s.

But many Egyptians, even some who joined the demonstrations, say they are desperate for a return to normal life.

Shops have been closed, making it hard for people to stock up on basic goods. Some prices have risen.

The currency could face pressure Monday when banks outside the Middle East reopen after the weekend. The pound fell Sunday when trade resumed in Egypt but the drop was less sharp than many traders had expected as the central bank appeared to support the currency.

Another confidence test will be a central bank auction of 15 billion pounds ($2.6 billion) of short-term Treasury bills, postponed from last week. The stock market is still closed.

(Reporting by Samia Nakhoul, 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 Angus MacSwan; Editing by Ralph Boulton)

Demonstrators in central Tahrir Square, focal point of an uprising that has rocked the Arab world and alarmed Western powers, said they would intensify their 12-day battle to oust the president who has vowed to stay on until September.

After nightfall, soldiers fired shots in the air to try to disperse the crowd, punctuating the festival atmosphere that had marked most of the day. But the demonstrators remained and the troops abandoned the attempt.

Sunday morning, the armed forces tried to get the nation back to work on the first day for banks to open after a week-long closure due to unrest in which up to 300 people may have been killed.

Armored personnel carriers stood guard at Cairo intersections where soldiers had erected sandbag barriers. Buses dropped employees off at large state banks.

The government’s willingness to talk to the Brotherhood was testimony to the ground that protesters have gained since the protests, triggered by frustration over corruption, economic hardship and political oppression during Mubarak’s 30-year-rule, first swept the nation on January 25.

Before then, members of the Brotherhood, by far the best organized opposition group, were regularly rounded up and jailed. The demonstrators around Tahrir Square, largely young and secular, lack their clear organization and leadership.

There have been signs of compromise in the opposition movement, with leaders backing off their refusal to talk to the government until Mubarak, 82, and the old guard leave.

But many reformists are determined to immediately force out Mubarak, a former air force commander who took over when Anwar Sadat was assassinated in 1981, fearing a loss of momentum in popular anger.

The government said in a statement after the meeting that the sides agreed to draft a road map for talks, indicating Mubarak would stay in power to oversee change.

It would also move to release jailed activists, guarantee press freedom and lift Egypt’s emergency laws. A committee was set up to study constitutional issues.

Footage showed Vice President Omar Suleiman, a former intelligence chief, chairing the talks with a portrait of Mubarak behind him. But the opposition said the government failed to meet their demand for a complete overhaul of the political system.

Abdel Monem Aboul Fotouh, a senior Brotherhood figure, said the government statement represented “good intentions but does not include any solid changes.”

Mohamed Adel, of the Sixth of April youth group which has been among the core protesters, said: “They evade the demands of the people.”

Opposition activists reject any compromise which would see Mubarak hand over power to Suleiman but also serve out his term — essentially relying on the old authoritarian system to pave the way to full civilian democracy and saving his face.

Nobel peace laureate Mohamed ElBaradei, who has emerged as a figurehead for the opposition coalition, criticized the fledgling negotiations and said he was not invited.

The talks were managed by the same people who had ruled Egypt for 30 years, he told NBC television in the United States.

“It’s managed by Vice President Suleiman,” ElBaradei said. “It is all managed by the military and that is part of the problem.”

ElBaradei, former director of the United Nations nuclear agency, said there was a big fear that the old government would retrench and return to power. The focus should be on the government, not Mubarak, he said.

“No, of course he doesn’t have to leave Egypt at all,” said ElBaradei. “He is an Egyptian, he has absolutely the right to live in Egypt.”

Gamal Soltan, editor of the independent newspaper al-Mesryoon, said the dialogue with Suleiman was too vague. The protesters would not leave before their demands were met.

“The problem is that the regime’s hesitancy in taking serious steps will lead to complications and the increase of the popular demonstrations and possibly force an army intervention.”

However, Rachid Mohamed Rachid, who was sacked along with the rest of the cabinet by Mubarak in response to protests, said: “I believe the presence of Mubarak in the next phase of transition for the next few months is very critical.”

The United States, which had bankrolled Mubarak and the army to the tune of $1.3 billion a year, has backed the talks but said dialogue must be given time.

Washington and its allies were caught by surprise by the uprising against Mubarak’s government, whom they saw as a bastion against Islamic militancy and a friend, albeit a reluctant one, of Israel.

The United States has called for gradual change in order to achieve an orderly handover of power but has given confused messages about when exactly it thought Mubarak should step down.

GUNFIRE IN THE AIR

The commander of the army, which many say holds the key to Egypt’s future, toured Tahrir Square Saturday to try to persuade the protesters to leave the usually busy intersection.

Thousands gathered there Sunday despite unseasonably bad weather, joining noon prayers to honor the “martyrs” killed in the bloodshed of the last few days. Groups read poetry, sang and danced to drums.

But in the evening, soldiers fired shots in the air to disperse the crowd and tried to move in Armored vehicles. The army tried similar tactics Saturday and protesters laid down in front of tanks to stop them moving.

“The coward is a coward and the brave is a brave and we will not leave the square,” said Sameh Ali, a protester in his 20s.

But many Egyptians, even some who joined the demonstrations, say they are desperate for a return to normal life.

Shops have been closed, making it hard for people to stock up on basic goods. Some prices have risen, and economic growth, which was running at 6 percent, is expected to suffer.

The pound closed at 5.93 to the U.S. dollar having weakened by 1.3 percent since it was last traded on January 27.

(Reporting by Samia Nakhoul, 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 Angus MacSwan; Editing by Ralph Boulton)

After a week of unprecedented rallies against the poverty, corruption and oppression under the 82-year-old military-backed leader, newly appointed Vice President Omar Suleiman appeared on state television to say Mubarak had asked him to begin dialogue with all political forces on constitutional and other reforms.

It seems unlikely Mubarak could preside for long within any new system that brought free elections to the most populous Arab state. After the fall of Tunisia’s veteran strongman two weeks ago, the shift will send a shockwave throughout the Middle East.

“I think it’s the beginning of the end,” said analyst Omar Ashour, speaking on Al Jazeera television.

Before Suleiman spoke, the armed forces command had declared the demonstrators’ demands “legitimate” and said it would not fire on peaceful protesters who called for a million people to take to the streets on Tuesday to push Mubarak out altogether.

At the same time, the United States, which has backed him as a bulwark against radical Islam and a friend to Israel with billions of dollars in military aid, said bluntly that he must revoke the emergency law under which he has ruled since 1981 and hold free elections. Washington has sent an envoy, former ambassador to Cairo Frank Wisner, to meet Egyptian leaders.

High on the agenda of Western powers, which have been caught off guard by the speed with which Mubarak’s police state has been pushed back by unarmed citizens, will be trying to prevent a full takeover by anti-Western Islamists.

MUSLIM BROTHERHOOD

Israeli Prime Minister Benjamin Netanyahu, for whom Egypt has been one of very few friendly neighbours, said he feared that the Muslim Brotherhood, a banned mass movement, could turn Egypt into the kind of theocracy installed in Iran in 1979.

The Brotherhood itself, which has taken a back seat to young, urban dissidents in the past week, has said it would seek a pluralist democracy. It has also called for mass protests.

Suleiman, an intelligence chief, was named by Mubarak on Saturday as his first ever vice president, a move that gave a first hint that he was thinking about an eventual handover.

Appearing on television, Suleiman said: “The president has asked me today to immediately hold contacts with the political forces to start a dialogue about all raised issues that also involve constitutional and legislative reforms in a form that will result in clear proposed amendments and a specific timetable for its implementation.”

Earlier, Mubarak had brought in a new government line-up with a promise of economic revival — but that failed to impress tens of thousands of people demonstrating across the country in defiance of a night-time curfew and unmolested by the troops.

ARMY ROLE

The army has seemed to be weighing whether to shift its loyalties. The military command may be keener to preserve a 60-year-old system of army-backed government than to prolong the personal rule of Mubarak.

“The armed forces will not resort to use of force against our great people,” it said, though it would stop looters.

“Your armed forces, who are aware of the legitimacy of your demands and are keen to assume their responsibility in protecting the nation and the citizens, affirms that freedom of expression through peaceful means is guaranteed to everybody.”

The White House and the European Union renewed their calls for Mubarak to accept the will of the people, though refrained from telling their veteran ally outright that he should quit.

Egyptians in the streets had no such reservations.

“The people want the president out!” chanted thousands in Cairo. “Wake up, Mubarak! Today is your last day!” was the cry of a crowd in Mahalla, a textile mill town in the Nile Delta.

“There is no turning back. There is no fear,” 35-year-old Hassan Shaaban said at the permanent rally in central Cairo. “After Mubarak, no other president will dare to oppress us.”

Since Friday, after Mubarak’s hated police fought battles with young demonstrators, the army has been on the streets in a massive show of force backed by its U.S.-built tanks. But the soldiers, widely admired by Egyptians, have looked on patiently, letting people vent their fury over poverty and dictatorship.

WHITE HOUSE

In Washington, which has backed Mubarak with money and arms as a vital ally against radical Islam in the Middle East, the White House spokesman said bluntly that he must address the grievances of his 80 million people and give them freedom. But he refused to say outright that Mubarak himself should go.

EU foreign ministers meeting in Brussels called for “an orderly transition to a broad-based government, leading to a genuine process of essential democratic reforms.”

The uprising erupted amid frustration over repression, corruption, poverty and the lack of democracy. It was in part inspired by the fall of Tunisia’s strongman leader on January 14 and has now prompted talk of a domino effect like that of 1989 which swept Soviet puppet governments out of eastern Europe.

“Something historic is happening in the Arab world,” Finnish Foreign Minister Alexander Stubb said. “But it’s too early to say whether this is the Berlin Wall moment, the 1989 moment.”

About 140 people have died in clashes with security forces in scenes that overturned Egypt’s standing as a stable country, promising emerging market and attractive tourist destination.

Although the movement started with no clear leaders or organisation, the opposition is taking steps to organise. The Muslim Brotherhood said it was seeking to form a committee with retired U.N. diplomat Mohamed ElBaradei to talk to the army.

Foreign governments scrambled to ensure the safety of their nationals trapped by the unrest in Egypt. One group of tourists was hunkered down in Cairo’s Marriott Hotel:

“I had heard a lot about Egypt’s history and the pyramids so I am very disappointed I cannot see all that, but I just want to get out,” said Albert So, an accountant from Hong Kong.

Companies, from gas drillers to supermarkets, also pulled out staff as confrontation brought economic life to a halt. Financial markets and banks were closed for a second day.

Internationally, global stocks flattened out after opening down on concern about oil and developed market stocks were up. Europe’s benchmark Brent crude was just short of $100 a barrel on fears the unrest could spread to regional oil producers.

Moody’s downgraded Egypt’s credit rating to Ba2 with a negative outlook from Ba1, saying the government might damage its weak finances by increasing social spending.

(Additional reporting by Andrew Hammond, Patrick Werr, Dina Zayed, Marwa Awad, Shaimaa Fayed, Sherine El Madany, Yasmine Saleh, Alison Williams and Samia Nakhoul in Cairo, and Peter Apps, Angus MacSwan and William Maclean in London; Writing by Alastair Macdonald; editing by David Stamp)

After a week of unprecedented rallies against the poverty, corruption and oppression under the 82-year-old military-backed leader, newly appointed Vice President Omar Suleiman appeared on state television to say Mubarak had asked him to begin dialogue with all political forces on constitutional and other reforms.

It seems unlikely Mubarak could preside for long within any new system that brought free elections to the most populous Arab state. After the fall of Tunisia’s veteran strongman two weeks ago, the shift will send a shockwave throughout the Middle East.

“I think it’s the beginning of the end,” said analyst Omar Ashour, speaking on Al Jazeera television.

Before Suleiman spoke, the armed forces command had declared the demonstrators’ demands “legitimate” and said it would not fire on peaceful protesters who called for a million people to take to the streets on Tuesday to push Mubarak out altogether.

At the same time, the United States, which has backed him as a bulwark against radical Islam and a friend to Israel with billions of dollars in military aid, said bluntly that he must revoke the emergency law under which he has ruled since 1981 and hold free elections. Washington has sent an envoy, former ambassador to Cairo Frank Wisner, to meet Egyptian leaders.

High on the agenda of Western powers, which have been caught off guard by the speed with which Mubarak’s police state has been pushed back by unarmed citizens, will be trying to prevent a full takeover by anti-Western Islamists.

MUSLIM BROTHERHOOD

Israeli Prime Minister Benjamin Netanyahu, for whom Egypt has been one of very few friendly neighbours, said he feared that the Muslim Brotherhood, a banned mass movement, could turn Egypt into the kind of theocracy installed in Iran in 1979.

The Brotherhood itself, which has taken a back seat to young, urban dissidents in the past week, has said it would seek a pluralist democracy. It has also called for mass protests.

Suleiman, an intelligence chief, was named by Mubarak on Saturday as his first ever vice president, a move that gave a first hint that he was thinking about an eventual handover.

Appearing on television, Suleiman said: “The president has asked me today to immediately hold contacts with the political forces to start a dialogue about all raised issues that also involve constitutional and legislative reforms in a form that will result in clear proposed amendments and a specific timetable for its implementation.”

Earlier, Mubarak had brought in a new government line-up with a promise of economic revival — but that failed to impress tens of thousands of people demonstrating across the country in defiance of a night-time curfew and unmolested by the troops.

ARMY ROLE

The army has seemed to be weighing whether to shift its loyalties. The military command may be keener to preserve a 60-year-old system of army-backed government than to prolong the personal rule of Mubarak.

“The armed forces will not resort to use of force against our great people,” it said, though it would stop looters.

“Your armed forces, who are aware of the legitimacy of your demands and are keen to assume their responsibility in protecting the nation and the citizens, affirms that freedom of expression through peaceful means is guaranteed to everybody.”

The White House and the European Union renewed their calls for Mubarak to accept the will of the people, though refrained from telling their veteran ally outright that he should quit.

Egyptians in the streets had no such reservations.

“The people want the president out!” chanted thousands in Cairo. “Wake up, Mubarak! Today is your last day!” was the cry of a crowd in Mahalla, a textile mill town in the Nile Delta.

“There is no turning back. There is no fear,” 35-year-old Hassan Shaaban said at the permanent rally in central Cairo. “After Mubarak, no other president will dare to oppress us.”

Since Friday, after Mubarak’s hated police fought battles with young demonstrators, the army has been on the streets in a massive show of force backed by its U.S.-built tanks. But the soldiers, widely admired by Egyptians, have looked on patiently, letting people vent their fury over poverty and dictatorship.

WHITE HOUSE

In Washington, which has backed Mubarak with money and arms as a vital ally against radical Islam in the Middle East, the White House spokesman said bluntly that he must address the grievances of his 80 million people and give them freedom. But he refused to say outright that Mubarak himself should go.

EU foreign ministers meeting in Brussels called for “an orderly transition to a broad-based government, leading to a genuine process of essential democratic reforms”.

The uprising erupted amid frustration over repression, corruption, poverty and the lack of democracy. It was in part inspired by the fall of Tunisia’s strongman leader on Jan. 14 and has now prompted talk of a domino effect like that of 1989 which swept Soviet puppet governments out of eastern Europe.

“Something historic is happening in the Arab world,” Finnish Foreign Minister Alexander Stubb said. “But it’s too early to say whether this is the Berlin Wall moment, the 1989 moment.”

About 140 people have died in clashes with security forces in scenes that overturned Egypt’s standing as a stable country, promising emerging market and attractive tourist destination.

Although the movement started with no clear leaders or organisation, the opposition is taking steps to organise. The Muslim Brotherhood said it was seeking to form a committee with retired U.N. diplomat Mohamed ElBaradei to talk to the army.

Foreign governments scrambled to ensure the safety of their nationals trapped by the unrest in Egypt. One group of tourists was hunkered down in Cairo’s Marriott Hotel:

“I had heard a lot about Egypt’s history and the pyramids so I am very disappointed I cannot see all that, but I just want to get out,” said Albert So, an accountant from Hong Kong.

Companies, from gas drillers to supermarkets, also pulled out staff as confrontation brought economic life to a halt. Financial markets and banks were closed for a second day.

Internationally, global stocks flattened out after opening down on concern about oil and developed market stocks were up. Europe’s benchmark Brent crude was just short of $100 a barrel on fears the unrest could spread to regional oil producers.

Moody’s downgraded Egypt’s credit rating to Ba2 with a negative outlook from Ba1, saying the government might damage its weak finances by increasing social spending.

(Additional reporting by Andrew Hammond, Patrick Werr, Dina Zayed, Marwa Awad, Shaimaa Fayed, Sherine El Madany, Yasmine Saleh, Alison Williams and Samia Nakhoul in Cairo, and Peter Apps, Angus MacSwan and William Maclean in London; Writing by Alastair Macdonald; editing by David Stamp)

The army, which put Mubarak into power in 1981, seemed to be weighing whether to shift its loyalties as the former general’s opponents spoke of getting a million people onto the streets on Tuesday to mark a week since the unprecedented protests began.

The military command, which may be keener to preserve a 60-year-old system of army-backed government than to prolong the personal rule of the 82-year-old Mubarak, issued a statement on Monday calling protesters’ demands “legitimate” and promising not to use force against people expressing themselves peacefully.

The White House and the European Union renewed their calls for Mubarak to accept the will of the people, though refrained from telling their veteran ally outright that he should quit.

Egyptians in the streets had no such reservations.

“The people want the president out!” chanted thousands in Cairo. “Wake up, Mubarak! Today is your last day!” was the cry of a crowd in Mahalla, a textile mill town in the Nile Delta.

On the sixth day of rallies that have roused fellow Arabs and undermined the long-entrenched assumptions of diplomats and investors, tens of thousands on the streets of Cairo and other cities poured scorn on Mubarak’s bid to save his 30-year rule by naming a new set of loyalists to his government.

“There is no turning back. There is no fear,” 35-year-old Hassan Shaaban said at the permanent rally in central Cairo. “After Mubarak, no other president will dare to oppress us.”

ARMY SPEAKS

Since Friday, after Mubarak’s hated police fought battles with young demonstrators, the army has been on the streets in a massive show of force backed by its U.S.-built tanks. But the soldiers, widely admired by Egyptians, have looked on patiently, letting people vent their fury over poverty and dictatorship.

In its first formal comment on events on Monday, the armed forces command issued a statement calculated for popular appeal. “The armed forces will not resort to use of force against our great people,” it said, though it would stop looters.

“Your armed forces, who are aware of the legitimacy of your demands and are keen to assume their responsibility in protecting the nation and the citizens, affirms that freedom of expression through peaceful means is guaranteed to everybody.”

In Washington, which has backed Mubarak with money and arms as a vital ally against radical Islam in the Middle East, the White House spokesman said bluntly that he must address the grievances of his 80 million people and give them freedom. But he refused to say outright that Mubarak himself should go.

EU foreign ministers meeting in Brussels called for “an orderly transition to a broad-based government, leading to a genuine process of essential democratic reforms.”

The uprising erupted amid frustration over repression, corruption, poverty and the lack of democracy. It was in part inspired by the fall of Tunisia’s strongman leader on January 14 and has now prompted talk of a domino effect like that of 1989 which swept Soviet puppet governments out of eastern Europe.

“Something historic is happening in the Arab world,” Finnish Foreign Minister Alexander Stubb said. “But it’s too early to say whether this is the Berlin Wall moment, the 1989 moment.”

TUESDAY RALLIES

About 140 people have died in clashes with security forces in scenes that overturned Egypt’s standing as a stable country, promising emerging market and attractive tourist destination.

Mubarak, a close U.S. ally and a stalwart in Western policy toward the Middle East, responded by offering economic reform to address public anger over hardships. New Finance Minister Samir Radwan told Reuters: “It is a national mission at a very critical time.” But he added he had no new policies just yet.

Troops backed by American-built tanks paid for with U.S. aid made no effort to disperse the crowd well after dark, hours after a curfew started. Military helicopters flew overhead.

“I’ll go home when Mubarak leaves,” read one banner.

Some worked mobile telephones, urging friends and family to join them through the night, hoping for mass rallies on Tuesday.

Mubarak’s new government did not impress them: “This is all nonsense,” said protester Omar el-Demerdash, 24, a research executive. “The demand is clear: We want Mubarak and his men to get out. Anything other than that is just not enough.”

On Monday, Mubarak named General Mahmoud Wagdy as interior minister to replace a man reviled for his repressive tactics.

“This new cabinet is too little, too late. I think Mubarak will probably be gone well before 30 days is up,” Zaineb Al-Assam of London-based Exclusive Analysis said.

“There are some figures in the cabinet who are deeply unpopular. An example is General Wagdy. That’s going to add to the protests. Mubarak will be seen by the army as a liability.”

MUSLIM BROTHERHOOD

Although the movement started with no clear leaders or organization, the opposition is taking steps to organize.

The Muslim Brotherhood, an Islamist group, said it was seeking to form a broad political committee with retired U.N. diplomat Mohamed ElBaradei to talk to the army.

The Brotherhood, with wide support among poor Egyptians, has until now kept in the background of an uprising spearheaded by the young urban poor and students. It fears a harsh crackdown.

But on Monday it called on people to keep up the protests until Mubarak and his ruling party were fully swept from power.

As the first Arab nation to sign a peace treaty with Israel, Egypt plays a key part in the peace process, and a change in leadership could have big implications for these efforts.

“We certainly don’t want Egypt to fall into the hands of extremists,” British Foreign Minister William Hague said. “We want an orderly transition to free and fair elections.”

In Israel, some commentators voiced shock at Obama’s move to abandon Mubarak — “a bullet in the back from Uncle Sam,” said one. Prime Minister Benjamin Netanyahu said he feared a radical Islamist takeover in Cairo like that in Iran in 1979.

Foreign governments scrambled to ensure the safety of their nationals trapped by the unrest in Egypt. One group of tourists was hunkered down in Cairo’s Marriott Hotel:

“I had heard a lot about Egypt’s history and the pyramids so I am very disappointed I cannot see all that, but I just want to get out,” said Albert So, an accountant from Hong Kong.

Companies, from gas drillers to supermarkets, also pulled out staff as confrontation brought economic life to a halt. Financial markets and banks were closed for a second day.

Internationally, global stocks flattened out after opening down on concern about oil and developed market stocks were up. Europe’s benchmark Brent crude was just short of $100 a barrel on fears the unrest could spread to regional oil producers.

Moody’s downgraded Egypt’s credit rating to Ba2 with a negative outlook from Ba1, saying the government might damage its already weak finances by increasing social spending to calm the protests.

(Additional reporting by Andrew Hammond, Patrick Werr, Dina Zayed, Marwa Awad, Shaimaa Fayed, Sherine El Madany, Yasmine Saleh, Alison Williams and Samia Nakhoul in Cairo, and Peter Apps, Angus MacSwan and William Maclean in London; Writing by Alastair Macdonald; editing by David Stamp)

A Reuters witness said police used teargas and live ammunition against demonstrators in Alexandria. Protesters also gathered on a main square in the capital Cairo in defiance of military orders for them to disperse.

The fresh unrest broke out as Mubarak clung to power, replacing his cabinet in an effort to appease angry Egyptians, complaining about poverty, corruption and unemployment.

The president ordered troops and tanks into Cairo and other cities overnight and imposed a curfew in an attempt to quell the protests that have shaken the Arab world’s most populous nation, a key U.S. ally, to the core.

Despite dozens of deaths in clashes on Friday, Egyptians said they would press on with protests until Mubarak quits.

“We are not demanding a change of cabinet, we want them all to leave, Mubarak before anyone else,” said Saad Mohammed, a 45-year-old welder who was among about 2,000 people gathered in Cairo’s central Tahrir Square.

The unrest, which follows the overthrow of Tunisian strongman Zine al-Abidine Ben Ali two weeks ago in a popular uprising, has sent shock waves through the Middle East, where other autocratic rulers may face similar challenges.

The capital was strewn with wreckage from a day of protests on Friday when protesters fought running battles with police firing rubber bullets, teargas and wielding batons — an unprecedented turn of events in the tightly-controlled country.

Government buildings, including the ruling party headquarters, still blazed on Saturday morning after being set alight by demonstrators who targeted symbols of Mubarak’s rule.

According to a Reuters tally, at least 74 people have been killed in the unrest. There was no official figure. Medical sources said at least 1,030 people were injured in Cairo, but with more protests starting throughout the country, the number was bound to rise.

As well as Cairo and Alexandria, clashes have also occurred in Suez, site of the strategically important canal.

The demonstrators, many of them young urban poor and students, complain of repression, corruption, and economic despair under Mubarak, who has held power since the 1981 assassination of President Anwar Sadat by Islamist soldiers.

Mubarak, whose government still rules with emergency laws, promised to address Egyptians’ grievances in a television address on Friday night. He sacked the cabinet but made clear he intended to stay in power and he condemned the violence.

The cabinet was meeting on Saturday to formalise the move.

So far, the protest movement seems to have no clear leader or organisation even if Mubarak did wish to open a dialogue.

Prominent activist Mohamed ElBaradei, a Nobel Peace Laureate for his work with the U.N. nuclear agency, returned to Egypt from Europe to join the protests. But many Egyptians feel he has not spent enough time in the country.

In an interview with France 24 television, El Baradei said Mubarak should step down and begin a transition of power.

“There is a consensus in Egypt in every part of society that this is a regime that is a dictatorship, that has failed to deliver on economic, social, and political fronts,” he said.

“We need a new beginning.”

The Muslim Brotherhood, an Islamist opposition group, has also stayed in the background, although several of its senior officials have been rounded up. The government has accused it of planning to exploit the protests.

The deployment of army troops to back up the police showed that Mubarak still has the support of the military, the country’s most powerful force. But any change of sentiment among the generals could seal his fate.

The army told Egyptians on Saturday not to gather in groups and to observe the curfew, which was extended by two hours to begin at 4 p.m. (1400 GMT).

Tanks were parked on roads leading into Tahrir Square, which was strewn with rubble, burned tyres and charred wood that had been used as barricades overnight.

The number of protesters was fewer than in previous days but they were nonetheless defiant.

“This is unacceptable, Mubarak must step down. Public unrest will not stop until this is achieved,” said Mohammed Essawy, a 26-year-old graduate student.

Protesters mocked Mubarak’s sacking of his cabinet as an empty gesture.

REVOLUTION IN THE AIR

Mahmoud Mohammed Imam, a 26-year-old taxi-driver, said: “All he said was empty promises and lies. He appointed a new government of thieves, one thief goes and one thief comes to loot the country.”

“This is the revolution of the people who are hungry, this is the revolution of the people who have no money against those with a lot of money.”

The final straw appeared to be the prospect of elections due to be held in September. Until now few had doubted that Mubarak would remain in control or bring in a successor in the shape of his 47-year-old son Gamal.

It also poses a dilemma for the United States. Mubarak, 82, has been a close ally of Washington and beneficiary of U.S. aid for decades, justifying his autocratic rule in part by citing a danger of Islamist militancy.

Egypt plays an important role in Middle East peacemaking and was the first Arab nation to sign a peace treaty with Israel.

U.S. President Barack Obama said he had spoken to Mubarak shortly after his speech on Friday and urged him to make good on his promises of reform.

“I want to be very clear in calling upon the Egyptian authorities to refrain from any violence against peaceful protesters,” Obama said. U.S. officials made clear that $1.5 billion in aid was at stake.

Anthony Skinner of political risk consultancy Maplecroft said Mubarak’s conduct was reminiscent of that of Tunisia’s Ben Ali, who fired his cabinet hours before he was forced to flee.

“Mubarak is showing he is still there for now and he is trying to deflect some of the force of the process away from himself by sacking the cabinet. We will have to see how people react but I don’t think it will be enough at all.”

(Additional reporting by Dina Zayed, Marwa Awad, Shaimaa Fayed, Sherine El Madany, Yasmine Saleh, Alison Williams and Samia Nakhoul in Cairo, and Alexander Dziadosz in Suez; Writing by Angus MacSwan, editing by Peter Millership)

Mubarak ordered troops and tanks into the capital Cairo and other cities overnight and imposed a curfew in an attempt to quell protests that have shaken the Arab world’s most populous nation, a key U.S. ally, to the core.

Despite dozens of deaths in Friday’s clashes, people turned out in the streets Saturday in defiance of security forces and said they would carry on protesting until Mubarak quits.

“We are not demanding a change of cabinet, we want them all to leave, Mubarak before anyone else,” said Saad Mohammed, a 45-year-old welder who was among about 2,000 people gathered in Cairo’s central Tahrir Square.

The capital was strewn with wreckage from a day of protests Friday in which tens of thousands of people called for an end to Mubarak’s reign, an unprecedented turn of events in the tightly-controlled country.

Government buildings, including the ruling party headquarters, still blazed Saturday morning after being set alight by demonstrators who defied the curfew to target symbols of Mubarak’s rule.

According to a Reuters tally, at least 54 people were killed Friday, when protesters fought running battles with police firing rubber bullets, teargas and wielding batons.

There was no official figure. Medical sources said at least 1,030 people were injured in Cairo, but with more protests starting throughout the country, the number is bound to rise.

The demonstrators, many of them young urban poor and students, complain of repression, corruption, and economic despair under Mubarak, who has held power since the 1981 assassination of President Anwar Sadat by Islamist soldiers.

Mubarak promised to address their grievances in a television address Friday night. He sacked the cabinet but made clear he intended to stay in power and he condemned the violence.

The cabinet was meeting Saturday to formalize the move.

So far, the protest movement seems to have no clear leader or organization even if Mubarak did wish to open a dialogue.

Prominent activist Mohamed ElBaradei, a Nobel Peace Laureate for his work with the U.N. nuclear agency, returned to Egypt from Europe to join the protests. But many Egyptians feel he has not spent enough time in the country.

The Muslim Brotherhood, an Islamist opposition group, has also stayed in the background, although several of its senior officials have been rounded up. The government has accused it of planning to exploit the protests.

The deployment of army troops to back up the police showed that Mubarak still has the support of the military, the country’s most powerful force. But any change of sentiment among the generals could seal his fate.

The armed forces told Egyptians Saturday not to gather in groups and to observe the curfew, or they would face “legal procedures.”

Tanks were parked on roads leading into Tahrir square, which was strewn with rubble, burned tires and charred wood that had been used as barricades overnight.

The number of protesters was far fewer than in previous days but they were nonetheless defiant.

“This is unacceptable, Mubarak must step down. Public unrest will not stop until this is achieved,” said Mohammed Essawy, a 26-year-old graduate student.

Protesters mocked Mubarak’s sacking of his cabinet as an empty gesture.

REVOLUTION IN THE AIR

Mahmoud Mohammed Imam, a 26-year-old taxi-driver, said: “All he said were empty promises and lies. He appointed a new government of thieves, one thief goes and one thief comes to loot the country.”

“This is the revolution of the people who are hungry, this is the revolution of the people who have no money against those with a lot of money.”

The unrest, which follows the overthrow of Tunisian strongman Zine al-Abidine Ben Ali two weeks ago in a popular uprising, has sent shock waves through the Middle East, where other autocratic rulers may face similar challenges.

The final straw appeared to be the prospect of elections due to be held in September. Until now few had doubted that Mubarak would remain in control or bring in a successor in the shape of his 47-year-old son Gamal.

It also poses a dilemma for the United States. Mubarak, 82, has been a close ally of Washington and beneficiary of U.S. aid for decades, justifying his autocratic rule in part by citing a danger of Islamist militancy.

Egypt plays an important role in Middle East peacemaking and was the first Arab nation to sign a peace treaty with Israel.

U.S. President Barack Obama said he had spoken to Mubarak shortly after his speech and urged him to make good on his promises of reform.

“I want to be very clear in calling upon the Egyptian authorities to refrain from any violence against peaceful protesters,” Obama said.

U.S. officials made clear that $1.5 billion in aid was at stake.

Anthony Skinner of political risk consultancy Maplecroft said Mubarak’s conduct was reminiscent of that of Tunisia’s Ben Ali, who also fired his cabinet hours before he was forced to flee.

“Mubarak is showing he is still there for now and he is trying to deflect some of the force of the process away from himself by sacking the cabinet. We will have to see how people react but I don’t think it will be enough at all.”

Markets were hit by the uncertainty. U.S. stocks suffered their biggest one-day loss in nearly six months, crude oil prices surged and the dollar and U.S. Treasury debt gained as investors looked to safe havens.

(Additional reporting by Dina Zayed, Marwa Awad, Shaimaa Fayed, Sherine El Madany, Yasmine Saleh, Alison Williams and Samia Nakhoul in Cairo, and Alexander Dziadosz in Suez; Writing by Angus MacSwan, editing by Peter Millership)