CAIRO (Reuters) - Political leaders were meeting inside and outside Egypt on Saturday to seek a way out of a dangerous impasse between President Hosni Mubarak and demonstrators calling for him to step down.
"The status quo is simply not sustainable," U.S. Secretary of State Hillary Clinton told a security conference in Munich on the 12th day of mass demonstrations against Mubarak, referring not only to the situation in Egypt but in the wider Middle East.
Saboteurs blew up a gas pipeline in northern Egypt overnight, disrupting flows to Israel and also to Jordan, where protesters angered by economic hardship have been demanding a more democratic political system.
Mubarak, who has reshuffled his government but refused to resign, met some of the new ministers on Saturday, the state news agency said, in a clear rebuff to the hundreds of thousands of people who have demanded the 82-year-old leader step down.
Trade Minister Samiha Fawzi said after the meeting that exports from Egypt were down 6 percent in January due to the unrest and curfew in the country. Authorities were providing extra food supplies to avoid shortages, she said.
Western governments have expressed support for the demonstrators but some were cautious about expecting too much too fast.
"President Mubarak has announced he will not stand for reelection nor will his son ... He has given a clear message to his government to lead and support this process of transition," Clinton told a security conference in Munich where world leaders will discuss how to proceed.
"That is what the government has said it is trying to do, that is what we are supporting, and hope to see it move as orderly but as expeditiously as possible under the circumstances," she said.
Egyptian Vice President Omar Suleiman, a longtime intelligence chief, was due to meet a group of prominent figures on Saturday to consider a proposal in which he would assume the president's powers temporarily, one of the group's members said.
But with some of the protesters insisting they wanted not just Mubarak but also his allies out, it was unclear that would be enough to end the crisis.
Furthermore, the prime minister said on Friday that it was unlikely the president would hand presidential powers to his newly appointed deputy, Al Arabiya television reported.
"We need the president to stay for legislative reasons," Prime Minister Ahmed Shafiq was quoted as saying in a headline.
German Chancellor Angela Merkel said change needed to be "peaceful and orderly," while British Prime Minister David Cameron called for a rapid transition to a new leadership.
"The longer it is put off, the more likely we are to get an Egypt we wouldn't welcome," he said.
Mubarak, who has pledged to step down in September, said on Thursday he believed Egypt would descend into chaos if he were to give in to protesters' demands that he quit immediately.
He has styled himself as a bulwark against Islamist militancy and essential actor in maintaining a peace treaty Egypt signed with Israel in 1979.
State TV called the pipeline attack a terrorist operation. Residents in the area reported a huge explosion and said flames were raging in an area near the pipeline in the El-Arish area of north Sinai.
The SITE intelligence group, which monitors al Qaeda and other Islamist websites, said earlier this week some groups had been urging Islamic militants to attack the pipeline to Israel.
"Saboteurs took advantage of the security situation and blew up the gas pipeline," a state television correspondent said.
The government in the past has used a perceived threat from Islamist militancy to justify its use of emergency laws which helped keep Mubarak in power.
Al Qaeda, which has its ideological roots in Egypt, has been largely sidelined in the protests against Mubarak.
NO EASY COMPROMISE
With the unrest crippling the economy in the Arab world's most populous nation, some Egyptians want a return to normal.
But a bourse official said on Saturday the stock market would not reopen on Monday as originally planned, without giving a new date. Banks were due to reopen on Sunday.
Mubarak met the prime minister, the finance minister, the oil minister, the trade and industry minister and the central bank governor on Saturday, the state news agency said.
In Cairo's Tahrir Square, protesters occupying the usually busy intersection in the heart of the city said they were not giving up, despite continuing tensions with Mubarak loyalists who attacked them earlier in the week.
"We are not leaving the square until our demands are met," one of them shouted over a loudspeaker, after a relatively peaceful night where some sang patriotic songs and chanted poetry over loudspeakers talking of victory over Mubarak.
Some ordinary Egyptians outside the protest area shouted profanities at those heading to the square in frustration at the collapse in law and order in some areas. Fights erupted now and then between protesters and people trying to persuade them to go home.
Hundreds of thousands of Egyptians held mostly peaceful demonstrations across the country on Friday, although clashes between anti-Mubarak protesters and armed men in the Nile Delta town of Mansoura in the north injured some, witnesses said.
The unprecedented challenge to Mubarak has rallied many different strands of society -- professionals and the poor, secular and religious, Muslims and Christians, internet-savvy youth with members of the Muslim Brotherhood Islamist movement.
The United Nations estimates 300 people have died in the unrest, inspired in part by protests in Tunisia which forced veteran strongman Zine al-Abidine Ben Ali to flee last month.
(Reporting by Edmund Blair, Samia Nakhoul, Patrick Werr, Dina Zayed, Marwa Awad, Shaimaa Fayed, Alexander Dziadosz, Yasmine Saleh, Sherine El Madany, Yannis Behrakis, Jonathan Wright, Andrew Hammond, Tom Perry and Alison Williams in Cairo, writing by Myra MacDonald and Philippa Fletcher, editing by Sonya Hepinstall)
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