UPDATE 5-Egypt's contentious Islamist constitution becomes law

Shaimaa Fayed and Yasmine Saleh
Reuters Middle East

* New constitution enforced, elections due in 2 months

* Egyptian pound falls to near eight-year low

* Egyptians anxious over battered economy, austerity

* Mursi calls for unity, vows to fix economy

CAIRO, Dec 26 (Reuters) - President Mohamed Mursi admitted

on Wednesday that Egypt's economy faces serious problems after

he enacted a new, bitterly contested constitution that is

supposed to help end political unrest and allow him to focus on

the financial crisis.

The president said the economy also had great opportunities

to grow, but earlier the Egyptian pound tumbled to its weakest

level in almost eight years as ever more people rushed to buy

dollars and withdraw their savings from banks.

Mursi, catapulted into power by his Islamist allies this

year, believes that adopting the constitution quickly and

holding elections to a permanent new parliament soon will help

to end the long period of turmoil that has wrecked the economy.

The presidency announced on Wednesday that Mursi had

formally approved the constitution, which was drafted by his

Islamist allies, the previous evening, shortly after results

showed that Egyptians had backed it in a referendum.

Keen to be seen as tough but fair, Mursi said it was time

for all political forces to put aside their differences and

start working together to bring economic stability.

"I will make all efforts, together with you, to push forward

the economy which faces huge challenges and has great

opportunities to grow," Mursi said in his first address to the

nation since the adoption of the constitution.

The text won about 64 percent in a two-stage referendum,

paving the way for a new parliamentary vote in about two months.

The main opposition group, which has until now boycotted all

rounds of national unity talks led by Mursi's office, said it

had not changed its position.

"The ongoing talks are farcical and theatrical," Hussein

Abdel Ghani, an opposition spokesman, told reporters. He called

on Egyptians to demonstrate against the new constitution on Jan.

25, the second anniversary of Egypt's revolution.

He added that the opposition would stick to its policy of

peaceful protest against Mursi's government, which he said

sought to use religion as a tool to create an oppressive state.


The referendum result marked yet another electoral victory

for the Islamists since veteran autocrat Hosni Mubarak was

toppled in 2011, following parliamentary elections last year and

the presidential vote that brought Mursi to power this year.

The charter states that the principles of sharia, Islamic

law, are the main source of legislation and that Islamic

authorities will be consulted on sharia - a source of concern to

the Christian minority and others.

Mursi's government, which has accused opponents of damaging

the economy by prolonging the political upheaval, now faces the

tough task of building a broad consensus as it prepares to

impose hugely unpopular austerity measures.

In his speech, Mursi said he would introduce incentives to

make Egypt - once a darling of emerging market investors - an

attractive place for business once again, and he would consider

making changes in the cabinet as part of his plan.

He also appeared keen to seem tolerant of those who voted

"no" in this month's referendum.

"This is their right," he said. "Those who said 'no' and

those who said 'yes', I thank you both because we do not want to

return to the era of one opinion or fake majorities."


The atmosphere of crisis deepened this week after the

Standard & Poor's agency downgraded Egypt's long-term credit

rating and warned of a possible further cut. The government has

imposed currency restrictions to reduce capital flight.

In Cairo's bustling centre, people appeared nervous, openly

expressing their frustration with economic instability as they

went about their daily business.

"The country's going to the pits. Everything is a mess,"

Hamdy Hussein, a 61-year-old building janitor, said angrily.

"It's worse than ever. Mubarak was better than now. People were

living and there was security."

Ashraf Mohamed Kamal, 30, added: "The economic situation

will be a mess in the next few years. It already is. People will

get hungrier. People are now begging more."

The pound traded as low as 6.1775 against the dollar on

Wednesday, close to its all-time low of 6.26 hit on Oct. 14,

2004, on concerns that the government might devalue or tighten

restrictions on currency movements.

"All customers are rushing to buy dollars after the

downgrading," said a dealer at a Cairo-based bank. "We'll have

to wait to see how the market will operate with the U.S. dollar,

because as you know there is a rush at the moment."

The government is now in talks with business figures, trade

unions and other groups to persuade them of the need for tax

increases to resolve the crisis. Mursi has committed to such

austerity measures to receive a $4.8 billion loan from the

International Monetary Fund.

However, Al-Mal newspaper quoted Planning Minister Ashraf

al-Araby as saying the government would not implement the tax

increases until it had completed the dialogue with different

parts of society.

Mursi's government argues the constitution offers enough

protection to all groups, and that many Egyptians are fed up

with street protests that have prevented a return to normality.

The charter gives Egypt's upper house of parliament, which

is dominated by Islamists, full legislative powers until the

vote for a new lower house is held.

Mursi is also due to address the upper house on Saturday in

a speech likely to be dominated by economic policy.

Sharpening people's concerns, the authorities imposed

currency controls on Tuesday to prevent capital flight. Leaving

or entering Egypt with more than $10,000 in cash is now banned.

Adding to the government's long list of worries,

Communications Minister Hany Mahmoud has resigned citing his

"inability to adapt to the government's working culture".

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