Obama cancels US exercises with Egypt

PRESIDENT Barack Obama says the United States has cancelled military exercises with Egypt to protest the killing of hundreds of protesters.

Obama on Thursday urged Egypt's army-installed authorities to lift a state of emergency and allow peaceful protests but stopped short of suspending $US1.3 billion ($A1.43 billion) in annual military aid.

"While we want to sustain our relationship with Egypt, our traditional cooperation cannot continue as usual when civilians are being killed in the streets and rights are being rolled back," Obama told reporters at his vacation home on Martha's Vineyard.

Obama said the United States informed Egypt it was suspending the Bright Star exercises, which has been scheduled every two years since 1981.

The exercises were also called off in 2011 as Egypt was in the throes of the revolt that overthrew longtime strongman Hosni Mubarak, a close US ally.

Egypt has been in turmoil since, with the army on July 3 ousting the country's first democratically elected president, the Islamist Mohamed Morsi.

More than 500 people have died since Wednesday when Egyptian security forces, defying appeals for restraint by the United States and other powers, crushed pro-Morsi demonstrations.

The United States has carefully avoided calling Morsi's ouster a coup, a designation that would require the United States to cut assistance.

Obama said that Morsi was "not inclusive" and that "perhaps even a majority" of Egyptians opposed the Muslim Brotherhood leader.

"While we do not believe that force is the way to resolve political differences, after the military's intervention several weeks ago, there remained a chance for reconciliation and an opportunity to pursue a democratic path," Obama said.

"Instead, we've seen a more dangerous path taken through arbitrary arrests, a broad crackdown on Mr Morsi's associations and supporters, and now tragically violence that has taken the lives of hundreds of people," he said.

"We believe that the state of emergency should be lifted, the process of national reconciliation should begin, that all parties need to have a voice in Egypt's future," Obama said.

He ignored a shouted question from a reporter on US assistance.

Egypt has been one of the top recipients of US assistance, primarily aimed at the military, since the most populous Arab nation signed a historic peace treaty with US ally Israel in 1979.

Israel has supported the continuation of US military aid, seeing it as vital to preserving the peace treaty and ensuring Egypt's cooperation against Islamist hardliners. The US Senate on July 31 easily defeated an attempt to cut aid to Egypt over the coup.

Obama insisted that the United States had no favourite candidate in Egypt, where conspiracy theories are rife about US support for either side.

"America cannot determine the future of Egypt. That's a task for the Egyptian people," he said.

He said that the United States also had a long journey "to perfect our union," saying: "We know that democratic transitions are measured not in months or even years, but sometimes in generations."

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