Egypt protests continue in deadlock over Mursi powers
* Tuesday's protest one of biggest since Mubarak's ouster
* Protesters say won't leave Tahrir until decree scrapped
* Mursi and senior judges held talks on compromise
* Assembly drawing up constitution in firing line
By Edmund Blair
CAIRO, Nov 28 (Reuters) - Hundreds of protesters were in Cairo's Tahrir Square for a sixth day on Wednesday, demanding that Egyptian President Mohamed Mursi rescind a decree they say gives him dictatorial powers.
Five months into the Islamist leader's term, and in scenes reminiscent of the popular uprising that unseated predecessor Hosni Mubarak last year, police fired teargas at stone-throwers following protests by tens of thousands on Tuesday against the declaration that expanded Mursi's powers and put his decisions beyond legal challenge.
Protesters say they will stay in Tahrir until the decree is withdrawn, bringing fresh turmoil to a nation at the heart of the Arab Spring and delivering a new blow to an economy already on the ropes.
Senior judges have been negotiating with Mursi about how to restrict his new powers, while protesters want him to dissolve an Islamist-dominated assembly that is drawing up a new constitution and which Mursi protected from legal review.
Any deal to calm the street will likely need to address both issues. But opposition politicians said the list of demands could grow the longer the crisis goes on. Many protesters want the cabinet, which meets on Wednesday, to be sacked, too.
Mursi's administration insists that his actions were aimed at breaking a political logjam to push Egypt more swiftly towards democracy, an assertion his opponents dismiss.
"The president wants to create a new dictatorship," said 38-year-old Mohamed Sayyed Ahmed, who has not had a job for two years. He is one of many in the square who are as angry over economic hardship as they are about Mursi's actions.
"We want the scrapping of the constitutional declaration and the constituent assembly, so a new one is created representing all the people and not just one section," he said.
The West worries about turbulence in a nation that has a peace treaty with Israel and is now ruled by Islamists they long kept at arms length. The United States, a big donor to Egypt's military, has called for "peaceful democratic dialogue".
Two people have been killed in violence since the decree, while low-level clashes between protesters and police have gone on for days near Tahrir. Violence has flared in other cities.
Trying to ease tensions with judges, Mursi assured Egypt's highest judicial authority that elements of his decree giving his decisions immunity applied only to matters of "sovereign" importance, a compromise suggested by the judges in talks.
That should limit it to issues such as declaring war, but experts said there was much room for interpretation. The judges themselves are divided, and the broader judiciary has yet to back the compromise. Some have gone on strike over the decree.
The fate of the assembly drawing up the constitution has been at the centre of a wrangle between Islamists and their opponents for months. Many liberals, Christians and more moderate Muslims have walked out, saying their voices are not being heard in the body dominated by Islamists.
That has undermined the work of the assembly, which is tasked with shaping Egypt's new democracy. Without a constitution in place, the president's powers are not permanently defined and a new parliament cannot be elected.
For now, Mursi holds both executive and legislative powers. His decree says his decisions cannot be challenged until a new parliament is in place. An election is expected in early 2013.
"If Mursi doesn't respond to the people, they will raise their demands to his removal," said Bassem Kamel, a liberal and former member of the now dissolved parliament that was dominated by Mursi's party, a wing of the Muslim Brotherhood.
He said Tuesday's protest showed that Egyptians "understood that the Brotherhood isn't for democracy but uses it as a tool to reach power and then to get rid of it".
Protecting his decisions and the constituent assembly from legal review was a swipe at the judiciary, still largely unreformed since Mubarak's era. In a speech on Friday, Mursi praised the judiciary as a whole but referred to corrupt elements he aimed to weed out.
One presidential source said Mursi wanted to re-make the Supreme Constitutional Court, a body of top judges that earlier this year declared the Islamist-led parliament void, leading to its dissolution by the then ruling military.
Both Islamists and their opponents broadly agree that the judiciary needs reform, but Mursi's rivals oppose his methods.
The courts have dealt a series of blows to Mursi and the Brotherhood. The first constituent assembly, also packed with Islamists, was dissolved. An attempt by Mursi in October to remove the unpopular general prosecutor was also blocked.
In his decree, Mursi gave himself the power to sack the prosecutor general and appoint a new one, which he duly did.
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