CAIRO (Reuters) - Egypt's Finance Minister Hazem el-Beblawi said he handed in his resignation on Tuesday after less than three months in the job because of an army crackdown on a protest by Christians, but the country's ruling generals rejected it.
The uncertainty over the vital finance portfolio is expected to pile more pressure on the military council, already under fire for a clumsy response to street violence and not giving a clear timetable for handing power to civilians.
The clashes in central Cairo on Sunday left 25 people dead, the worst outbreak of violence since the ousting of President Hosni Mubarak in February, and sparked anger among Coptic Christians, politicians and rights activists.
Egyptian media reported that Beblawi, who also held the title of deputy prime minister for economic affairs, withdrew his resignation, but he denied this.
"I did not withdraw my resignation. The higher (military) council rejected it ... and I am now in a difficult situation... I am confused," Beblawi told Reuters by telephone.
"I took this decision because of the Maspero situation and security, not because of economic policy," Beblawi said, referring to the area of Cairo where the clashes took place.
Beblawi was appointed in July by the military council which took power after the overthrow of Mubarak. He was named in a reshuffle that followed demonstrations over the pace of reforms and trials of Mubarak and his allies.
Beblawi has been negotiating with Gulf Arab states for assistance to support a state budget that has ballooned as a result of Egypt's political turmoil. Growth has also been hit hard by a sharp downturn in tourism while foreign investors have withdrawn funds.
He told state media that the government might not have had a direct role in the clashes, but it must still shoulder ultimate responsibility.
"This sets a very important precedent," said Adel Soliman, head of the International Center for Future and Strategic Studies. "It didn't happen before that a minister ... submits his resignation and says very clearly: 'I am resigning because the government holds responsibility for certain events'."
Government spokesman Mohamed Hegazy denied a report carried by Al Jazeera television that the entire cabinet had resigned.
Asked to confirm whether Sharaf or other ministers might be stepping down, Beblawi said: "I don't know."
INVESTORS WANT CLARITY
The army replaced Beblawi's predecessor Samir Radwan in July after he secured a loan from the International Monetary Fund only to be forced to turn it down, partly because the army generals did not want to build up debts.
Beblawi said last week that Egypt was now reconsidering the IMF funding and was still in talks with Arab states for funds of close to $7 billion.
With the exodus of tourists and foreign investors since the uprising, Egypt's foreign exchange reserves have dropped $12 billion since the start of the year.
The deputy central bank governor said on Tuesday that the economy was safe and that remittances and Suez canal revenues were enough to ensure dollar resources for the country.
But foreign investors who dumped Egyptian assets in January and February say clarity on how the government will fund its spending plans, and successful elections later this year, will be needed before they return in numbers.
"Investors are looking for greater stability in public finances and for clarity on financial support from outside Egypt," said EFG-Hermes strategist Simon Kitchen.
News of Beblawi's resignation came shortly before the end of trading on the Egyptian Exchange, whose main EGX30 index closed down 2 percent.
The military council told the interim government to investigate the clashes urgently and said it would take necessary measures to maintain security, but activists have demanded an independent investigation.
"The demands will grow now, of course, as the opposition will say: 'Here is one of your own, the deputy prime minister, who is admitting that responsibility lies with the government," Soliman said.
(Reporting by Shaimaa Fayed and Tom Pfeiffer; Additional reporting by Maha El Dahan; Writing by Tom Pfeiffer; Editing by Catherine Evans)