VICTORY: Supporters of the Muslim Brotherhood celebrate yesterday in Cairo's Tahrir Square, the focus of last February's revolution, after the presidential election. Picture: REUTERS

THE Muslim Brotherhood said yesterday its candidate Mohamed Mursi had won Egypt's first free presidential election, as moves by the ruling generals to grab new powers set the stage for a clash with the Islamists.

Mr Mursi won 52% of the vote in the two-man runoff that ended on Sunday, according to a preliminary and unofficial count, the Brotherhood's Freedom and Justice Party said. It was too early to say who won, said the other candidate, Ahmed Shafik, a former air force general who served as premier under Hosni Mubarak.

Hours after polls closed on Sunday, the army council issued a decree curtailing presidential powers. It authorised the generals to appoint the committee that will write the new constitution, and keeps the military budget off limits to civilian oversight. The move, after a ruling last week dissolving parliament, fuelled charges that the army is hijacking Egypt's transition to democracy as its economy struggles to recover after the revolt that ousted Mubarak last year.

The army has shown "no inhibition about making the most brazen power grabs imaginable, they're not even really pretending any more," said Shadi Hamid, director of research at the Brookings Doha Cent re. Mr Mursi's election win "shows that there are many Egyptians who are uncomfortable" with wider military powers, he said. "It's going to be a nasty fight, and it's not a fight that's going to be resolved anytime soon."

Egypt's benchmark stock index slid 2% before noon in Cairo yesterday, extending its drop since last month's first-round vote to 13%. Yields on the country's dollar bonds due in 2020 rose 10 basis points to 7%, a four-week high.

"We're in a worse position than we were before," Said Hirsh, an economist at Capital Economics in London, said. The army's expanded role will leave the new president with "very little power over introducing new policies or economic reforms or anything else," he said. "That will definitely increase uncertainty, and markets are reacting."

The Brotherhood would join the April 6 youth movement, the mostly secular group that spearheaded the uprising against Mubarak last year, in a mass rally against the military, an official of the Brotherhood's party said.

Mursi supporters drove around Cairo sounding car hooters to celebrate victory on Sunday night, and a small crowd gathered in Tahrir Square. The candidate, in a predawn press conference, sought to ease tensions. "We are not seeking revenge," said Mr Mursi, a US-trained engineer. "We are all the sons of one country."

Mr Shafik's campaign had sought to play on fears among secularists, Christians and others that the Brotherhood will seek to impose Islamic rule. Mr Mursi promised yesterday to "stand at an equal distance from all, and be a servant to all Egyptians."

A priority for any Egyptian government is reviving the $240bn economy. Growth stalled after last year's revolt as tourists and investors stayed away. The government's borrowing costs for one-year debt have surged by about 50% since the start of last year.

Bloomberg