By Anna Ringstrom
STOCKHOLM (Reuters) - The European Union should review aid programs to Egypt and the International Monetary Fund should hold off from supporting Cairo after a crackdown on supporters of the ousted Islamist president, Sweden's foreign minister said on Thursday.
Carl Bildt told Reuters in an interview that Europe had very limited influence on Egypt's dominant military, although the United States had stronger links, and economic sanctions were not the right response to the bloodshed.
He forecast a period of severe repression, with hardliners in command in Cairo, but said the Europeans should keep talking to all sides so as to be ready, if the opportunity arose, to play a role in achieving a solution.
"We will have to look at the different EU programs to see which ones are appropriate and which ones are not in the present situation," Bildt said. "It will be tricky for the IMF as well to go forward in this situation."
"The IMF board will have to assess if there is a government that can be seen as credible in terms of economic policy, which doesn't seem to be the case so far," he said.
At least 525 people were killed and thousands injured when security forces used force on Wednesday to crush protest sit-ins by supporters of elected President Mohamed Mursi, ousted by the army on July 3 in response to mass demonstrations.
Bildt rejected criticism that the Europeans had failed to do enough from the outset to support the Arab Spring pro-democracy uprisings that began in 2011, toppling several long-standing autocratic rulers in North Africa and beyond.
"We went flat out, particularly with Egypt ... I think we did everything we could have done. And it was obvious from the beginning how difficult it was, there were deeply entrenched divisions within the Egyptian society," he said.
"Everyone underestimated the problems and the dangers inherent in what was unleashed two and a half years ago."
The Swedish minister, a former U.N. high representative in Bosnia, said the EU had tried its best with foreign policy chief Catherine Ashton and special envoy Bernardino Leon to facilitate dialogue in Egypt, communicating with political and military leaders.
"I don't think there is any room for mediation at the moment. The possibilities that might have been there a week or two ago have been blown off completely by what's happened," he said.
While the EU's "moral position is clear", economic sanctions would not have much impact, Bildt said, and it was important to keep channels of communication open with as wide a spectrum of Egyptian society as possible.
(Writing by Paul Taylor; editing by Andrew Roche)