3 Min Read
* Some EU governments want to cut aid to Egypt
* EU leverage limited because aid already reduced
* Decisions unlikely before Wednesday
By Justyna Pawlak
BRUSSELS, Aug 19 (Reuters) - EU foreign ministers will hold an emergency meeting in Brussels on Wednesday to discuss how to force Egypt's army-backed rulers into finding a peaceful compromise with supporters of deposed President Mohamed Mursi.
Options likely to be discussed include cutbacks in Europe's 5 billion euro ($6.7 billion) package of grants and loans promised last year, as well as a possible arms embargo against Egypt, said EU envoy Bernardino Leon.
Egypt, the most populous Arab country, is enduring the bloodiest internal conflict in its modern history as the army, which deposed Mursi on July 3 after huge protests against him, cracks down on his Muslim Brotherhood.
The upheaval is causing global jitters, but no consensus on how to respond has emerged in the West or the Arab world.
Leon said Europe still believed a political solution was possible in Egypt, where almost 900 people have been killed since last week.
"No options are being ruled out today," he said after a meeting of senior EU diplomats in Brussels, convened in reaction to the crackdown. "We are discussing responses to the current discussion in a very open-minded way."
Several foreign ministers have said in recent days that aid should be cut back, but on Monday many diplomats expressed concerns that withholding funds would likely hurt the Egyptian population more than the government.
European institutions have given no direct budget support to Cairo since 2012 because of a lack of democratic reforms. Most of the cash sent to Egypt goes to the civil society.
Underlining the lack of global consensus, Saudi Foreign Minister Prince Saud al-Faisal on Monday pledged to fill any financial gaps left by Western countries withdrawing aid from Egypt.
Diplomats say EU governments are broadly divided between those who advocate taking a strong stance to support democratic principles in Egypt and others who say the bloc should preserve its impartiality and its ability to mediate in the future.
Britain's Foreign Secretary William Hague said on Monday that aid to Egypt should be reviewed without excluding future assistance.
"We have to stick to those principles ... of supporting institutions, not taking sides, of promoting dialogue and of keeping faith with the majority of people," he told BBC radio.
EU diplomats have said that the bloc could also use the possibility of suspending a broad cooperation deal with Egypt to pressure the government.
Dating back to 2001, the deal includes provisions for free trade in industrial goods and concessionary arrangements for trade in agricultural products.
Egyptian Foreign Minister Nabil Fahmy sought to pre-empt any attempt to use aid flows as a lever by saying he would look at all such assistance to see "what aid is being used to pressure Egypt and whether this aid has good intentions and credibility".