Egypt govt talks with reformists about Mubarak

Egypt tried to get the nation back to work on Sunday with banks reopening, and the vice president held unprecedented talks with a banned Islamist group and other opponents about their demand that President Hosni Mubarak quit.

A steady stream of employees flowed into Cairo's financial district and customers queued to access their accounts, the first day for banks to open after a week-long closure due to unrest that the United Nations says may have killed 300 people.

Armoured personnel carriers stood guard at intersections where soldiers had erected sandbag barriers, as buses dropped employees off at large state banks.

Demonstrators in Cairo's Tahrir Square, marking a Day of Martyrs for those killed in protests, said they would intensify their 12-day battle to oust the president who has vowed to stay on until September elections.

With some Egyptians keen for a return to normal, the government has warned of the damage to political stability and the economy of prolonging protests that have shaken the Middle East and opened a new chapter in Egypt's modern history.

The commander of the army, which many say holds the key to Egypt's future, was touring Tahrir (Liberation) Square to try to persuade the protesters, complaining about poverty, repression and corruption, to leave the usually busy intersection.

We want people to go back to work and to get paid, and life to get back to normal, army commander Hassan al-Roweny said.

The United States, Egypt's ally which provides the army with $1.3 billion annually, has underlined the need for gradual change in political talks between the government and opposition groups in order to achieve an orderly handover of power.

I don't believe that we solve the world's problems by flicking a switch and holding an election ... Egypt is a classic case in point, said British Prime Minister David Cameron, echoing a note of caution in the West over any sudden change.

Washington and its allies have struggled to keep up with events in the Arab world's most populous nation, which was the first Arab country to sign a peace deal with Israel and is the guardian of the Suez canal and a force against militant Islam in the region.

With signs of economic life resuming and concessions from the government to the reform movement, the cabinet wants the uprising to settle down to political talks to put an end to clashes between demonstrators and Mubarak supporters.

There have also 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.

HARD CORE COMMITMENT

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

Mohamed ElBaradei, who has emerged as a spokesman for the opposition, said there was a hard core who would never give up their protest in Tahrir Square and other cities around Egypt until Mubarak steps down. He was anxious about more violence.

It might not be every day but what I hear is that they might stage demonstrations every other day, said the Nobel peace laureate. The difference is that it would become more angry and more vicious. And I do not want to see it turning from a beautiful, peaceful revolution into a bloody revolution.

The United States has backed the talks between Vice President Omar Suleiman, a long-time intelligence chief, and opposition groups, but made clear dialogue must be given time.

Suleiman met the groups on Sunday in talks joined for the first time by the Muslim Brotherhood, Egypt's most organised opposition group, which had previously refused to talk to the government until Mubarak left.

We have decided to engage in a round of dialogue to ascertain the seriousness of officials towards the demands of the people and their willingness to respond to them, a spokesman for the banned Brotherhood told Reuters on Saturday.

Rashad Bayoumi, a senior Brotherhood member, spoke of a positive atmosphere, during an interview with Al Arabiya television. Footage showed Suleiman chairing the meeting, with a portrait of Mubarak.

It is testimony to the ground protesters have gained that the government is willing to talk to the group which would have been unthinkable before the protests started on January 25. Before that date members were being regularly rounded up and jailed.

The Brotherhood, which took a backseat in the early days of the protest and then raised its profile, has downplayed Israel's fears of an Iranian-style theocracy emerging in Egypt.

CHOKE THE REVOLUTION

Symbolically, the leadership of the ruling National Democratic Party quit, including the president's son Gamal, in a move the Brotherhood said was a ruse to choke the revolution.

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.

To hear ... that Mubarak should stay and lead the process of change, and that the process of change should essentially be led by his closest military adviser ... would be very, very disappointing, ElBaradei said.

Egyptian activists were appalled by Frank Wisner, sent to Egypt as President Barack Obama's envoy, who said rhetoric urging a swift exit could backfire, suggesting Mubarak had a crucial role to play.

The State Department scrambled to distance itself from Wisner's remarks, saying it appreciated his work in Cairo but did not necessarily share his views on Mubarak's future.

Rachid Mohamed Rachid, who was sacked along with the rest of the cabinet by Mubarak in an effort to stave off escalating protests, called a transition without Mubarak's leadership negative and incomprehensible.

At Tahrir Square, thousands gathered despite unseasonably bad weather, joining noon prayers to honour the martyrs killed in the bloodshed of the last few days.

But many Egyptians, even some who joined widespread nationwide demonstrations to end the 30-year rule of Mubarak, say they are desperate for a return to normal life.

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

Egyptian state television said on Saturday that saboteurs had blown up a pipeline that runs through Egypt's North Sinai, disrupting flows to Israel and Jordan, after Islamists called on militants to exploit the unrest that has rocked the economy.

But an Israeli partner in the pipeline said gas supply from Egypt to Israel could resume within a week after what it called a fire at a gas metering station, and did not refer to sabotage.

The pound closed at 5.93 to the U.S. dollar having weakened by less than 1 percent since it was last traded on January 27.

The way things are looking we do not expect a run on the pound at the moment. We think that the prevailing atmosphere is a lot calmer than we might have assumed last week, Angus Blair, head of research Beltone Financial, told Reuters.