BJP may dissolve Karnataka assembly to counter Yeddyurrappa

NEW DELHI: BJP's troubles in Karnataka are clearly growing by the day. The party's core group is scheduled to meet here on Wednesday to review the Karnataka crisis that has further deepened after former CM and Lingayat strongman B S Yeddyurrappa held a show of strength rally on Sunday to announce the launch of his breakaway outfit, the Karnataka Janata Party (KJP), in Belgaum.

The BJP top brass is likely to discuss the fate of the members of its state unit, who had openly displayed their allegiance to Yeddyurrappa on Sunday. However, the party in-charge for Karnataka Dharmendra Pradhan, who was scheduled to reach Bangalore to attend a state-level meeting on Wednesday, called off his visit on Tuesday night.

The central leadership — already weakened with BJP chief Nitin Gadkari himself under fire from within the party — is in a fix over the action to be taken against the rebels since any expulsion of the MLAs will reduce the Jagadish Shettar government to a minority.

Sunday's breakfast meeting at Yeddyurrappa's house was attended by 23 sitting MLAs, 10 MLCs, four MPs and eight ministers from the Shettar government. Yeddyurrappa had asked his loyalists not to attend the KJP's launch rally on Sunday evening, but 14 BJP MLAs and one minister (Sunil Volapure) shared the stage with the Lingayat leader in Belgaum. Gadkari is learnt to be of the view that CM Shettar should dissolve the assembly and opt for snap polls, which are slated to be in mid-2013. However, since governor H S Bhardwaj is to decide the assembly's fate, the saffron party is uncertain whether the latter will accept the government's recommendation.

If the governor asks the Shettar government to prove its majority and the CM fails to do so, Central rule could be imposed in the state, much to the discomfort for the BJP, which is keen to continue for some more months to shore up its winning prospect.

There is a distinct possibility that the ministers, including the eight who attended the KJP chief's breakfast meeting, could be dropped from the cabinet. Show cause notices could also be sent to some of the BJP rebels. But even the rebels are surprised that only the Tumkur MP, G S Basuraj, was served a show cause notice from the party so far, while others like excise minister Renukacharya, who has openly criticized the party leadership, or Yeddyurrappa's son, BJP MP B Y Raghavendra, who organized the successful Belgaum rally for KJP, were not served any notices so far. Volapure quit his ministerial post voluntarily, but the BJP leadership had to go into a huddle till 2am to drop another minister B J Puttuswamy from the cabinet.

Yeddyurrappa too is waiting for the BJP to take action against the rebels as he does not want to be seen as the hand that toppled the state government, especially when it is led by a fellow Lingayat, Shettar.

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APNewsBreak: DA investigating Texas cancer agency

AUSTIN, Texas (AP) — The Texas prosecutor responsible for investigating public corruption among state officials said Tuesday that he has opened an investigation into the state's troubled $3 billion cancer-fighting agency.

Gregg Cox, director of the Travis County district attorney's public integrity unit, told The Associated Press that an investigation has begun into the Cancer Prevention and Research Institute of Texas. The agency also is under investigation by the Texas attorney general's office after an $11 million grant to a private company did not receive the proper review.

Cox said his unit, which prosecutes crimes related to the operation of state government, is beginning its investigation not knowing "what, if any, crime occurred" at CPRIT.

His announcement came on the same day that CPRIT said its executive director had submitted his resignation letter and amid escalating scrutiny over the management of the nation's second-biggest pot of cancer research dollars.

CPRIT has not been able to focus on fighting the disease due to "wasted efforts expended in low value activities" during the past tumultuous eight months, Executive Director Bill Gimson wrote in a resignation letter dated Monday. Gimson offered to stay on until January, and the agency's board must still approve his request to step down.

Gimson has led the state agency since it launched in 2009. But he fell under mounting criticism over the recent disclosure that an $11 million award to a private company was never reviewed. It was the second time this year that a lucrative taxpayer-funded grant instigated backlash and raised questions about oversight.

"Unfortunately, I have also been placed in a situation where I feel I can no longer be effective," Gimson wrote.

The Texas attorney general's office has said it is looking into CPRIT's $11 million grant to Dallas-based Peloton Therapeutics. An internal audit performed by the agency revealed that Peloton's proposal was approved for funding in 2010 without being reviewed by an outside panel.

Gimson said last week that Peloton's funding was the result of an honest mistake that happened when the agency was still young and in the process of installing checks and balances. Agency emails surrounding the Peloton grant are no longer available, Gimson said, and state investigators said they will work to find them.

Only the National Institutes of Health doles out more cancer research dollars than CPRIT, which has awarded more than $700 million so far. The agency's former chief science officer, Nobel laureate Alfred Gilman, resigned earlier this year over a separate $20 million award that Gilman claimed received a thin review. That led some of the nation's top scientists to accuse the agency of charting a politically-driven path.

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Follow Paul J. Weber on Twitter: www.twitter.com/pauljweber

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Video of Columbus Circle Killer Released

The hunt for New York's Columbus Circle killer took on a new impetus today as police released surveillance video showing the killer moments before he calmly walked up to Brandon Lincoln Woodard and put one bullet from a silver colored handgun into the back of the Los Angeles man's head in full view of holiday shoppers.

The video confirms the details of the hit man's calculated wait for his victim as first reported on ABCNews.com on Monday.

"In the video, the gunman wanted in the shooting death yesterday of Brandon Lincoln Woodard, 31, of Los Angeles, is seen 10 minutes before the shooting," Deputy Commissioner for Public Information Paul Browne said in a statement today.

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Woodard, who is described by police as linked to the hip hop part of the Los Angeles entertainment industry, was strolling down 58th Street near the southern end of Central Park when he was gunned down.

"The shooter, who appears to be bald and may have a beard, exited a late model Lincoln sedan, initially bare-headed, but soon pulled the hood of his jacket over his head. Ten minutes later, at approximately 2 p.m., the shooter walked up behind Woodard and fired," Browne said.

In a grainy still image also released, the gunman is seen behind Woodard a moment before the shooting, pulling the weapon from his jacket.

Just before he was shot, Woodard turned "instinctively almost," then turned back to his portable electronic device, police told ABC News.

Sources tell ABC News that Woodard was arrested in 2009 in connection with a robbery in California.

Woodard was raised in Los Angeles' Ladera Heights neighborhood and attended the private Campbell Hall High School, they said. He attended college and law school at Loyola Marymount College in Los Angeles, law enforcement sources and friends said.

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Egypt army given temporary power to arrest civilians

CAIRO (Reuters) - Egypt's Islamist president has given the army temporary power to arrest civilians during a constitutional referendum he is determined to push through despite the risk of bloodshed between his supporters and opponents accusing him of a power grab.

Seven people were killed and hundreds wounded last week in clashes between the Islamist Muslim Brotherhood and their critics besieging Mohamed Mursi's graffiti-daubed presidential palace. Both sides plan mass rallies on Tuesday.

The elite Republican Guard has yet to use force to keep protesters away from the palace, which it ringed with tanks, barbed wire and concrete barricades after last week's violence.

Mursi, bruised by calls for his downfall, has rescinded a November 22 decree giving him wide powers but is going ahead with a referendum on Saturday on a constitution seen by his supporters as a triumph for democracy and by many liberals as a betrayal.

A decree issued by Mursi late on Sunday gives the armed forces the power to arrest civilians and refer them to prosecutors until the announcement of the results of the referendum, which the protesters want cancelled.

Despite its limited nature, the edict will revive memories of Hosni Mubarak's emergency law, also introduced as a temporary expedient, under which military or state security courts tried thousands of political dissidents and Islamist militants.

But a military source stressed that the measure introduced by a civilian government would have a short shelf-life.

"The latest law giving the armed forces the right to arrest anyone involved in illegal actions such as burning buildings or damaging public sites is to ensure security during the referendum only," the military source said.

Presidential spokesman Yasser Ali said the committee overseeing the vote had requested the army's assistance.

"The armed forces will work within a legal framework to secure the referendum and will return (to barracks) as soon as the referendum is over," Ali said.

Protests and violence have racked Egypt since Mursi decreed himself extraordinary powers he said were needed to speed up a troubled transition since Mubarak's fall 22 months ago.

The Muslim Brotherhood has voiced anger at the Interior Ministry's failure to prevent protesters setting fire to its headquarters in Cairo and 28 of its offices elsewhere.

Critics say the draft law puts Egypt in a religious straitjacket. Whatever the outcome of the referendum, the crisis has polarized the country and presages more instability at a time when Mursi is trying to steady a fragile economy.

On Monday, he suspended planned tax increases only hours after the measures had been formally decreed, casting doubts on the government's ability to push through tough economic reforms that form part of a proposed $4.8 billion IMF loan agreement.

"VIOLENT CONFRONTATION"

Rejecting the referendum plan, opposition groups have called for mass protests on Tuesday, saying Mursi's eagerness to push the constitution through could lead to "violent confrontation".

Islamists have urged their followers to turn out "in millions" the same day in a show of support for the president and for a referendum they feel sure of winning with their loyal base and perhaps with the votes of Egyptians weary of turmoil.

The opposition National Salvation Front, led by liberals such as Mohamed ElBaradei and Amr Moussa, as well as leftist firebrand Hamdeen Sabahy, has yet to call directly for a boycott of the referendum or to urge their supporters to vote "no".

Instead it is contesting the legitimacy of the vote and of the whole process by which the constitution was drafted in an Islamist-led assembly from which their representatives withdrew.

The opposition says the document fails to embrace the diversity of 83 million Egyptians, a tenth of whom are Christians, and invites Muslim clerics to influence lawmaking.

But debate over the details has largely given way to noisy street protests and megaphone politics, keeping Egypt off balance and ill-equipped to deal with a looming economic crisis.

"Inevitability of referendum deepens divisions," was the headline in Al-Gomhuriya newspaper on Monday. Al Ahram daily wrote: "Political forces split over referendum and new decree."

Mursi issued another decree on Saturday to supersede his November 22 measure putting his own decisions beyond legal challenge until a new constitution and parliament are in place.

While he gave up extra powers as a sop to his opponents, the decisions already taken under them, such as the dismissal of a prosecutor-general appointed by Mubarak, remain intact.

"UNWELCOME" CHOICE

Lamia Kamel, a spokeswoman for former Arab League chief Moussa, said the opposition factions were still discussing whether to boycott the referendum or call for a "no" vote.

"Both paths are unwelcome because they really don't want the referendum at all," she said, but predicted a clearer opposition line if the plebiscite went ahead as planned.

A spokeswoman for ElBaradei, former head of the U.N. nuclear watchdog, said: "We do not acknowledge the referendum. The aim is to change the decision and postpone it."

Mahmoud Ghozlan, the Muslim Brotherhood's spokesman, said the opposition could stage protests, but should keep the peace.

"They are free to boycott, participate or say no, they can do what they want. The important thing is that it remains in a peaceful context to preserve the country's safety and security."

The army stepped into the conflict on Saturday, telling all sides to resolve their disputes via dialogue and warning that it would not allow Egypt to enter a "dark tunnel".

A military source said the declaration read on state media did not herald a move by the army to retake control of Egypt, which it relinquished in June after managing the transition from Mubarak's 30 years of military-backed one-man rule.

The draft constitution sets up a national defense council, in which generals will form a majority, and gives civilians some scrutiny over the army - although not enough for critics.

In August Mursi stripped the generals of sweeping powers they had grabbed when he was elected two months earlier, but has since repeatedly paid tribute to the military in public.

So far the army and police have taken a relatively passive role in the protests roiling the most populous Arab nation.

(Additional reporting by Edmund Blair and Yasmine Saleh; editing by Philippa Fletcher)

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US report faults Pakistan over Afghan war

WASHINGTON: Despite an easing of tensions with the United States, Pakistan is persistently undermining security in Afghanistan by permitting safe havens for insurgents, a Pentagon report said Monday.

In a twice-a-year war assessment mandated by Congress, the Defense Department said that the 68,000 US troops in Afghanistan and their allies had succeeded in preventing Taliban advances while limiting civilian casualties.

But Taliban havens across the border in Pakistan, the limited capacity of the Afghan government and "endemic corruption" pose the greatest risks as the United States prepares to pull out troops by the end of 2014, the Pentagon said.

The report noted the better US relations with Pakistan, which agreed in July to reopen Western forces' supply routes into Afghanistan. Pakistan had refused access after a US border strike killed 24 of its troops in November 2011.

"However, Pakistan's continued acceptance of sanctuaries for Afghan-focused insurgents and failure to interdict (explosive) materials and components continue to undermine the security of Afghanistan and pose an enduring threat to US, coalition and Afghan forces," the report said.

The report, which covered developments from April through September, said that Pakistan "has contributed to US interests while simultaneously falling short in other areas."

The Pentagon also reported modest progress between Afghanistan and Pakistan. Since then, Afghan President Hamid Karzai said that an attack last week on the Afghan intelligence chief was planned in Pakistan.

Islamabad denied Karzai's assertion. Many analysts believe Pakistan has sought to keep open ties to militants in Afghanistan in hopes of preserving influence after the NATO withdrawal.

The Pentagon report said that enemy attacks went up one percent from April-September 2011. But it attributed the rise to a shorter poppy harvest, which kept low-level insurgents busy for less time, and said life had improved in urban areas.

Enemy attacks "are now disproportionately occurring outside of populated areas, and the security of many of Afghanistan's largest cities increased substantially during the reporting period," it said.

However, the Pentagon figures showed that enemy attacks were higher than in 2009 before President Barack Obama ramped up troop numbers. The last of the 33,000 "surge" troops withdrew in September this year.

Opinion polls show that most Americans want to end their country's longest-ever war, which was launched following the September 11, 2001 attacks by Al-Qaeda militants living in Afghanistan under Taliban rule.

The Pentagon report described "substantial progress" by Afghans in taking the lead in their own security, but acknowledged logistical and management shortcomings in the national forces as well as corruption.

A Defense Department official, briefing reporters on the report on condition of anonymity, said that the goal remained for Afghan forces to be able to operate independently by 2014.

"Is it going to be a challenge? I agree with you, yes," he said. "Will there continue to be a need for training and advising after 2014? Yes."

The report recorded 66 insider attacks on NATO or Afghan national forces, a sharp rise from 43 the year earlier, but voiced hope that new countermeasures would reduce the threat.

The Pentagon gave a positive assessment to efforts to reduce civilian casualties, seen as a major cause of resentment toward the Western-backed government.

Civilian casualties caused by NATO forces decreased by 35 percent compared with the previous year, although overall civilian casualties rose due to attacks by insurgents, the report said.

-AFP/ac

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Shinde to examine Afzal's mercy plea after Parliament session

NEW DELHI: Union home minister Sushil Kumar Shinde will start examining mercy petition files, sent back to the MHA recently by the President, after the winter session of Parliament concludes on December 20.

Parliament attack convict Afzal Guru's file is among the seven files returned by President Pranab Mukherjee to the home ministry. Mukherjee has asked Shinde, who took charge of the home ministry on August 1, to take a relook at the MHA opinion tendered on these petitions during his predecessor P Chidambaram's tenure.

At a press conference here to present the MHA's report card for November, Shinde also said on Monday that no request had been received from either the family of Ajmal Kasab, the 26/11 convict who was hanged on November 21, or the government of Pakistan for his body.

To a question on the status of mercy plea of Guru, Shinde said a decision to reject his clemency application was taken earlier.

"(Subsequently) The file was sent to the President for consideration. But the President sent back to me seven cases (including Guru). When Parliament session is over, I will look into it. I can't tell you the date," he said.

"As soon as the file comes to me, I will not take much time," Shinde.

Guru was sentenced to death for the 2001 Parliament attack in which nine people, including security force personnel, were killed and another 16 were injured.

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Surprise: New insurance fee in health overhaul law

WASHINGTON (AP) — Your medical plan is facing an unexpected expense, so you probably are, too. It's a new, $63-per-head fee to cushion the cost of covering people with pre-existing conditions under President Barack Obama's health care overhaul.

The charge, buried in a recent regulation, works out to tens of millions of dollars for the largest companies, employers say. Most of that is likely to be passed on to workers.

Employee benefits lawyer Chantel Sheaks calls it a "sleeper issue" with significant financial consequences, particularly for large employers.

"Especially at a time when we are facing economic uncertainty, (companies will) be hit with a multi-million dollar assessment without getting anything back for it," said Sheaks, a principal at Buck Consultants, a Xerox subsidiary.

Based on figures provided in the regulation, employer and individual health plans covering an estimated 190 million Americans could owe the per-person fee.

The Obama administration says it is a temporary assessment levied for three years starting in 2014, designed to raise $25 billion. It starts at $63 and then declines.

Most of the money will go into a fund administered by the Health and Human Services Department. It will be used to cushion health insurance companies from the initial hard-to-predict costs of covering uninsured people with medical problems. Under the law, insurers will be forbidden from turning away the sick as of Jan. 1, 2014.

The program "is intended to help millions of Americans purchase affordable health insurance, reduce unreimbursed usage of hospital and other medical facilities by the uninsured and thereby lower medical expenses and premiums for all," the Obama administration says in the regulation. An accompanying media fact sheet issued Nov. 30 referred to "contributions" without detailing the total cost and scope of the program.

Of the total pot, $5 billion will go directly to the U.S. Treasury, apparently to offset the cost of shoring up employer-sponsored coverage for early retirees.

The $25 billion fee is part of a bigger package of taxes and fees to finance Obama's expansion of coverage to the uninsured. It all comes to about $700 billion over 10 years, and includes higher Medicare taxes effective this Jan. 1 on individuals making more than $200,000 per year or couples making more than $250,000. People above those threshold amounts also face an additional 3.8 percent tax on their investment income.

But the insurance fee had been overlooked as employers focused on other costs in the law, including fines for medium and large firms that don't provide coverage.

"This kind of came out of the blue and was a surprisingly large amount," said Gretchen Young, senior vice president for health policy at the ERISA Industry Committee, a group that represents large employers on benefits issues.

Word started getting out in the spring, said Young, but hard cost estimates surfaced only recently with the new regulation. It set the per capita rate at $5.25 per month, which works out to $63 a year.

America's Health Insurance Plans, the major industry trade group for health insurers, says the fund is an important program that will help stabilize the market and mitigate cost increases for consumers as the changes in Obama's law take effect.

But employers already offering coverage to their workers don't see why they have to pony up for the stabilization fund, which mainly helps the individual insurance market. The redistribution puts the biggest companies on the hook for tens of millions of dollars.

"It just adds on to everything else that is expected to increase health care costs," said economist Paul Fronstin of the nonprofit Employee Benefit Research Institute.

The fee will be assessed on all "major medical" insurance plans, including those provided by employers and those purchased individually by consumers. Large employers will owe the fee directly. That's because major companies usually pay upfront for most of the health care costs of their employees. It may not be apparent to workers, but the insurance company they deal with is basically an agent administering the plan for their employer.

The fee will total $12 billion in 2014, $8 billion in 2015 and $5 billion in 2016. That means the per-head assessment would be smaller each year, around $40 in 2015 instead of $63.

It will phase out completely in 2017 — unless Congress, with lawmakers searching everywhere for revenue to reduce federal deficits — decides to extend it.

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New Evidence Suggests Biblical Flood Happened

The story of Noah's Ark and the Great Flood is one of the most famous from the Bible, and now an acclaimed underwater archaeologist thinks he has found proof that the biblical flood was actually based on real events.

In an interview with Christiane Amanpour for ABC News, Robert Ballard, one of the world's best-known underwater archaeologists, talked about his findings. His team is probing the depths of the Black Sea off the coast of Turkey in search of traces of an ancient civilization hidden underwater since the time of Noah.

Tune in to Christiane Amanpour's two-part ABC News special, "Back to the Beginning," which explores the history of the Bible from Genesis to Jesus. Part one airs on Friday, Dec. 21 and part two on Friday, Dec. 28, both starting at 9 p.m. ET on ABC.

Ballard's track record for finding the impossible is well known. In 1985, using a robotic submersible equipped with remote-controlled cameras, Ballard and his crew hunted down the world's most famous shipwreck, the Titanic.

Now Ballard is using even more advanced robotic technology to travel farther back in time. He is on a marine archeological mission that might support the story of Noah. He said some 12,000 years ago, much of the world was covered in ice.

"Where I live in Connecticut was ice a mile above my house, all the way back to the North Pole, about 15 million kilometers, that's a big ice cube," he said. "But then it started to melt. We're talking about the floods of our living history."

The water from the melting glaciers began to rush toward the world's oceans, Ballard said, causing floods all around the world.

"The questions is, was there a mother of all floods," Ballard said.

According to a controversial theory proposed by two Columbia University scientists, there really was one in the Black Sea region. They believe that the now-salty Black Sea was once an isolated freshwater lake surrounded by farmland, until it was flooded by an enormous wall of water from the rising Mediterranean Sea. The force of the water was two hundred times that of Niagara Falls, sweeping away everything in its path.

Fascinated by the idea, Ballard and his team decided to investigate.

"We went in there to look for the flood," he said. "Not just a slow moving, advancing rise of sea level, but a really big flood that then stayed... The land that went under stayed under."

Four hundred feet below the surface, they unearthed an ancient shoreline, proof to Ballard that a catastrophic event did happen in the Black Sea. By carbon dating shells found along the shoreline, Ballard said he believes they have established a timeline for that catastrophic event, which he estimates happened around 5,000 BC. Some experts believe this was around the time when Noah's flood could have occurred.

"It probably was a bad day," Ballard said. "At some magic moment, it broke through and flooded this place violently, and a lot of real estate, 150,000 square kilometers of land, went under."

The theory goes on to suggest that the story of this traumatic event, seared into the collective memory of the survivors, was passed down from generation to generation and eventually inspired the biblical account of Noah.

Noah is described in the Bible as a family man, a father of three, who is about to celebrate his 600th birthday.

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Egypt's opposition rejects constitutional referendum

CAIRO (Reuters) - Egypt's main opposition coalition rejected on Sunday Islamist President Mohamed Mursi's plan for a constitutional referendum this week, saying it risked dragging the country into "violent confrontation".

Mursi's decision on Saturday to retract a decree awarding himself wide powers failed to placate opponents who accused him of plunging Egypt deeper into crisis by refusing to postpone the vote on a constitution shaped by Islamists.

"We are against this process from start to finish," Hussein Abdel Ghani, spokesman of the National Salvation Front, told a news conference, calling for more street protests on Tuesday.

The Front's main leaders - Nobel peace laureate Mohamed ElBaradei, former Foreign Minister Amr Moussa and leftist Hamdeen Sabahy - did not attend the event.

Hundreds of protesters milled around Mursi's palace, despite tanks, barbed wire and other barriers installed last week after clashes between Islamists and their rivals killed seven people.

"Holding a referendum now in the absence of security reflects haste and an absence of a sense of responsibility on the part of the regime, which risks pushing the country towards violent confrontation," a statement from the Front said.

The Muslim Brotherhood, which propelled Mursi from obscurity to power, urged the opposition to accept the referendum's verdict.

Islamists say the vote will seal a democratic transition that began when a popular uprising toppled Hosni Mubarak 22 months ago after three decades of military-backed one-man rule.

Their liberal, leftist and Christian adversaries say the document being fast-tracked through could threaten freedoms and fails to embrace the diversity of Egypt's 83 million people.

"ACT OF WAR"

Mursi had given some ground on Saturday when he annulled the fiercely contested decree issued on November 22 that gave him extra powers and shielded his decisions from judicial review.

But some measures taken under the decree remain in force and the president has insisted the referendum go ahead on December 15.

Liberal opposition leader Ahmed Said earlier described the race to a referendum as an "act of war" against Egyptians.

Egypt is torn between Islamists, who were suppressed for decades, and their rivals, who fear religious conservatives want to squeeze out other voices and restrict social freedoms. Many Egyptians just crave stability and economic recovery.

Brotherhood spokesman Mahmoud Ghozlan said the scrapping of Mursi's decree had removed any reason for controversy.

"We ask others to announce their acceptance of the referendum result," he said on the group's Facebook page, asking whether the opposition would accept "the basics of democracy".

The cancellation of Mursi's decree, announced after a "national dialogue" on Saturday boycotted by almost all the president's critics, has not bridged a deep political divide.

Prime Minister Hisham Kandil, a technocrat with Islamist leanings, said the referendum was the best test of opinion.

"The people are the makers of the future as long as they have the freedom to resort to the ballot box in a democratic, free and fair vote," he said in a cabinet statement.

But opposition factions, uncertain of their ability to vote down the constitution against the Islamists' organizational muscle, want the document redrafted before any vote.

"A constitution without consensus can't go to a referendum," said Hermes Fawzi, 28, a protester outside the palace. "It's not logical that just one part of society makes the constitution."

DIALOGUE

Egypt tipped into turmoil after Mursi grabbed powers to stop any court action aimed at hindering the transition. An assembly led by the Brotherhood and other Islamists then swiftly approved the constitution it had spent six months drafting.

Opponents, including minority Christians, had already quit the assembly in dismay, saying their voices were being ignored.

After the dialogue hosted by Mursi, a spokesman announced that the president had issued a new decree whose first article "cancels the constitutional declaration" of November 22. He said the referendum could not be delayed for legal reasons.

The decree ignited more than two weeks of sometimes violent protests and counter-rallies in Egypt. Mursi's foes have chanted for his downfall. Islamists fear a plot to oust the most populous Arab nation's first freely-elected leader.

Islamists reckon they can win the referendum and, once the new constitution is in place, a parliamentary election about two months later. The Islamist-led lower house elected this year was dissolved after a few months by a court order.

Investors appeared relieved after Mursi rescinded his decree, sending Egyptian stocks 4.4 percent higher on Sunday. Markets are awaiting approval of a $4.8 billion IMF loan later this month designed to support the budget and economic reforms.

The military, which led Egypt's transition for 16 turbulent months after Mubarak fell, told feuding factions on Saturday that only dialogue could avert "catastrophe". But a military source said these remarks did not herald an army takeover.

(Additional reporting by Edmund Blair and Yasmine Saleh; editing by David Stamp)

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Mass rival rallies called in Egypt as crisis sharpens

CAIRO: Rival mass protests have been called for next Tuesday in Egypt over a bitterly disputed constitutional referendum, raising the potential for more violent street clashes in a sharpening political crisis.

President Mohamed Morsi's chief foes, the opposition National Salvation Front, late Sunday called for huge protests in Cairo to reject the December 15 referendum on a new charter.

The Muslim Brotherhood, from which Morsi hails, told AFP that it and allied Islamist movements would counter with their own big rallies in the capital in support of the referendum.

If the duelling demonstrations go ahead, there is a risk of vicious further clashes like the ones that erupted between both sides outside the presidential palace last Wednesday, killing seven people and wounding hundreds.

Egypt's powerful army, which is trying to remain neutral in the deepening struggle, warned on the weekend it "will not allow" a worsening of the crisis. It said both sides must start dialogue.

Morsi has made a key concession to the opposition on the weekend by rescinding a decree giving himself wide-ranging powers free from judicial challenge.

But the opposition was unmoved, and maintained its position that no talks could happen while the referendum was going ahead.

"The Front calls for demonstrations in the capital and in the regions on Tuesday as a rejection of the president's decision that goes against our legitimate demands," National Salvation Front spokesman Sameh Ashour told a news conference.

"We do not recognise the draft constitution because it does not represent the Egyptian people," he said, reading a statement.

Going ahead with the referendum "in this explosive situation with the threat of the Brothers' militias amounts to the regime abandoning its responsibilities," he said.

The Brotherhood's spokesman, Mahmud Ghozlan, told AFP that the Alliance of Islamist Forces it belongs to was also "calling for a demonstration Tuesday, under the slogan 'Yes to legitimacy'," and in support of the referendum.

The almost nightly protests over the past two weeks have brought out thousands of people into the streets.

In recent days, the protesters have hardened their slogans, going beyond criticism of the decree and the referendum to demand Morsi's ouster.

Amid the protests and tensions, the army was watching nervously. Tanks and troops have been deployed outside the presidential palace but they have made no move to confront the demonstrators.

On Sunday, air force F-16 warplanes flew low over the city centre. The official MENA news agency described the unusually low flyover as an exercise against "hostile air attacks and to secure important state installations."

That did not prevent several hundred anti-Morsi protesters gathering outside his palace late Sunday, according to an AFP correspondent there.

The opposition sees the constitution, which was largely written up by Islamists, as a tool weakening human rights, the rights of women, religious minorities, and the judiciary's independence.

It dismisses arguments by Morsi aides that the referendum could not be delayed under constitutional rules requiring a plebiscite two weeks after it is formally presented to the president.

"The two-week deadline is just a date for organising the referendum, and you can postpone it without any problems," a Front leader, Munir Fakhri, told AFP.

Morsi's camp, though, argues that it is up to the people to accept or reject the draft constitution.

If it is rejected in the referendum, Morsi has promised to have a new one drawn up by 100 officials chosen by the public, rather than by the Islamist-dominated parliament as was the case for the current text.

Prime Minister Hisham Qandil has urged protesters from both sides to stop demonstrating, and to vote in next Saturday's referendum, MENA said.

Analysts said still-strong public support for Morsi, and the proven ability of his Muslim Brotherhood to mobilise Egypt's voters at the grassroots level, would likely help the draft constitution be adopted.

"The Muslim Brotherhood believes that it has majority support so it can win the constitutional referendum," said Eric Trager, analyst at the Washington Institute for Near East Policy.

If that happens, he warned, it would "set up the country for prolonged instability."

-AFP/ac

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