President Hosni Mubarak's new cabinet on Monday holds its first full meeting since an uprising started nearly two weeks ago, with no concrete progress in talks with Islamists and an opposition who demand his immediate exit.
Mubarak, 82, who has refused calls to end his 30-year-old presidency before September polls, saying his resignation would cause chaos in the Arab world's most populous nation, has tried to focus on restoring order.
Protesters, barricaded in a tent camp in Tahrir Square in the heart of Cairo, have vowed to stay until Mubarak quits and hope to take their campaign to the streets with more mass demonstrations on Tuesday and Friday.
The banned Islamist Muslim Brotherhood movement was among the groups that met Egyptian government officials at the weekend, a sign of how much has already changed in an uprising that has rocked the Arab world and alarmed Western powers.
Opposition figures reported little progress in the talks. While protesters want Mubarak to step down immediately, many worry that when he does leave, he will be replaced not with the democracy they seek but with another authoritarian ruler.
With a government pledged to reform, an opposition with limited political experience, a constitutional process that mitigates against haste, and an important strategic role, Egypt's next steps must be considered carefully, US officials say.
The opposition has made big gains in the past two weeks.
Mubarak has said he will not run again for president, his son has been ruled out as next in line, a vice-president has been appointed for the first time in 30 years, the ruling party leadership has quit and the old cabinet was sacked.
Perhaps more important, protesters now take to the streets almost with impunity in their hundreds of thousands. Before Jan. 25, a few hundred would have met a crushing police response in this key US ally whose army receives $1.3 billion in aid annually.
"OVER THE HORIZON"
Appearing to soften her position for Mubarak to step down, US Secretary of State Hillary Clinton has said her policy on Egypt looks "over the horizon" to its possible democratic future -- a future that must be carefully planned.
The cautious US approach to the unrest shaking its strategic Middle East partner has come at a cost, putting the Obama administration out of step with the protesters who say Mubarak must quit now for serious political talks to take place.
Former Trade Minister Rachid Mohamed Rachid, sacked by Mubarak along with the rest of the cabinet, said: "I believe the presence of Mubarak in the next phase of transition for the next few months is very critical."
Determined protesters in Tahrir (Liberation) Square were settling into a routine on Monday after a bloody revolt which the United Nations says may have cost 300 lives so far. Activists have called the uprising the "Nile Revolution".
Keen to get traffic moving around Tahrir Square, the army tried early on Monday to squeeze the area the protesters have occupied. Overnight campers rushed out of their tents to surround soldiers attempting to corral them into a smaller area.
Wary of the army's effort to gain ground to try and restore the traffic flow in central Cairo, dozens of protesters slept inside the tracks of the army vehicles. The powerful army's role in the next weeks is considered critical to the future of Egypt.
"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," protester Mohamed Shalaby, 27, told Reuters by telephone.
Egypt's government tried to get the country back to normal when the working week began on Sunday. Banks reopened after a week-long closure with lines of customers accessing accounts but hours, and withdrawals, were limited. Schools remained shut.
Many Egyptians, including those who took part in nationwide demonstrations last week against Mubarak, are keen to get back to work and are worried about the effects of the crisis on stability, the economy and the important tourism sector.
The Egyptian pound weakened slightly on the second day of trade after a week-long closure.
Traders said state-controlled banks seemed to be selling dollars to support the pound.
"Things are stable. I can't say they're good, but they're not collapsing," said a trader at a Cairo-based bank. The bourse remained closed because of the political turmoil.
Government ministers will hold their first full meeting at 2:00 p.m. (1200 GMT) since Mubarak reshuffled his cabinet on Jan. 28 in an attempt to appease protesters enraged by years of corruption, economic hardship and political oppression.
The presence at the weekend talks of the banned Muslim Brotherhood, whose members have for years been repressed by Mubarak's feared security forces, was a significant development that would have been unthinkable before the uprising.
Egypt's courts have repeatedly rebuffed the Brotherhood's requests for recognition as a party on the grounds that the constitution bans parties based on religion.
In the past three decades, Brotherhood members have been tortured, repressed, arrested and tried in military courts under emergency laws implemented when Mubarak took over the presidency after the assassination of Anwar Sadat by Islamist soldiers from his army.
The government insists it investigates accusations of torture and says it uses emergency laws to fight terrorism.
The government said after the weekend 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 change.
The opposition said the government failed to meet its demand for a complete overhaul of Egypt's 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 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, criticised 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.
Gamal Soltan, editor of the al-Mesryoon newspaper, said the protesters would not give up 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."
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