DAVOS-UPDATE 1-Arab officials say reform only answer to unrest
* Arab League's Moussa says Arab world must reform
* Saudi prince says unsure about Mubarak's future
* Annan sees reform dilemma for Arab rulers
(Recasts with Moussa, Annan, IMF official)
By Amena Bakr
DAVOS, Switzerland, Jan 26 (Reuters) - Reforms are needed across the Arab world to address angry citizens' demands for a better standard of living after protests in Tunisia and Egypt, Arab officials attending the Davos World Economic Forum said on Wednesday.
A Saudi royal family member said the recent ousting of Tunisia's longtime ruler after weeks of violent protests has turned the spotlight onto neighbouring Egyptian President Hosni Mubarak's 30-year rule.
"The Arab citizen is angry and we feel broken as citizens. Reform is the name of the game, and reform has to happen now all over the Arab world," Arab League Secretary-General Amre Moussa a former Egyptian foreign minister, told Reuters.
Thousands of Egyptians defied a ban on protests and returned to the streets on Wednesday to demand that Mubarak leave office, a day after three protesters and a policeman were killed in anti-government demonstrations across the most populous Arab state.
Saudi Prince Turki al-Faisal, former intelligence chief who also served as ambassador to Britain and the United States, told Reuters Insider television he was not sure about Mubarak's future.
"In Egypt, I really can't say where this is going to go," he said in an interview.
"Whether they can catch up as leaders to what the population is aiming (for) is still to be seen," he said.
Police used riot trucks on Wednesday to break up a crowd of as many as 3,000 people who had gathered outside a Cairo court complex, one of the places where demonstrations had started on Tuesday.
The government announced on Wednesday it had banned all demonstrations, but Prime Minister Ahmed Nazif was quoted by the state news agency as saying it was "intent on guaranteeing the freedom of expression by legitimate means".
Egyptian demonstrators angry at poverty and repression have been inspired by this month's downfall of Tunisian President Zine al-Abidine Ben Ali.
"I think developments in Tunis took everybody by surprise," said al-Faisal.
"Each country has its own criteria and its own dynamics. I think we will have to wait a day or two until things clear up to wait and see how these demonstrations (in Egypt) are going to go," he added.
Former U.N. Secretary-General Kofi Annan said Arab regimes faced a dilemma in how they reacted to events in Tunisia.
"The solution is reform, but the problem is also reform," he told a Davos panel. Governments might be afraid to rush into reforms for fear of unleashing events that ran out of control.
The Egyptian unrest was a top talking point in Davos. In the coffee area, a group of Gulf Arabs jabbed their fingers excitedly at a stream of news pictures of the unrest on an I-Pad tablet computer and exchanged comments.
Masood Ahmed, director of the International Monetary Fund's Middle East and Central Asia Department, said common pressures driving protests in the Arab world included unemployment, particularly among young people, and low growth.
"To counter this all, Middle East economies have to grow faster and to do that they have to look at their competitiveness," he told Reuters in Davos.
The IMF continued to recommend reducing subsidies and targetting them towards the needy, he said, even as some countries such as Algeria have reversed subsidy cuts in response to protests over rising food prices.
"The money that governments save by doing this can be spent more effectively on the poor and they can use it to develop education," Ahmed said. (Additional reporting by Dmitry Zhdannikov, Natsuko Waki and Paul Taylor, writing by Paul Taylor; editing by Mike Peacock and Mike Nesbit)
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