Commander Job Price, 42, of Pottstown, Pennsylvania, shown in this Naval Special Warfare Group TWO handout photograph, died of a non-combat related injury in central Afghanistan's Uruzgan Province, the Pentagon said in a statement. A senior member of the U.S. Navy's elite SEAL unit has died in Afghanistan, the Defense Department said on December 23, 2012, and media reports said the death was a possible suicide.

WASHINGTON | Sun Dec 23, 2012 10:47pm EST

WASHINGTON (Reuters) - The commander of an elite U.S. Navy SEAL unit has died in Afghanistan, the Defense Department said on Sunday, and a U.S. military official said his death was being investigated as a suspected suicide.

Commander Job Price, 42, of Pottstown, Pennsylvania, died on Saturday of a non-combat related injury in central Afghanistan's Uruzgan Province, the Pentagon said in a statement.

"This incident is currently under investigation," it said.

Price, was assigned to a Naval Special Warfare unit in Virginia Beach, Virginia, and was the commanding officer of SEAL Team Four. He failed to show up for an event on Saturday and colleagues found him dead in his quarters, the U.S. military official told Reuters on condition of anonymity.

NBC News and CNN also quoted unnamed military officials as saying that the death was being looked at as a possible suicide.

Lieutenant David Lloyd, a spokesman for Naval Special Warfare Group Two, which comprises the four SEAL teams on the U.S. East Coast, declined to comment on the cause of death, saying it was under investigation.

Price was married and had a daughter. He had been a naval officer since May 1993, Lloyd said.

Captain Robert Smith, the Group Two commander, said in a statement: "The Naval Special Warfare family is deeply saddened by the loss of our teammate. We extend our condolences, thoughts and prayers to the family, friends, and NSW community during this time of grieving.

"As we mourn the loss and honor the memory of our fallen teammate, those he served with will continue to carry out the mission."

SEAL is an acronym for sea, air, land.

(Reporting by Ian Simpson and Phil Stewart; editing by Christopher Wilson)

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KABUL | Mon Dec 24, 2012 12:26am EST

KABUL (Reuters) - Pakistan is genuine about backing the nascent Afghan peace process and shares the Kabul government's goal of transforming the Taliban insurgency into a political movement, a senior Afghan government official told Reuters.

"They have told us that they share the vision contained in our roadmap which is basically to transform the Taliban from a military entity into a political entity to enable them to take part in the Afghan political process and peacefully seek power like any other political entity in Afghanistan, he said.

"This is the vision that they share."

The official, who is closely involved in reconciliation efforts, said recent face-to-face talks between senior Taliban members and Afghan officials in France were an "enormously helpful" step in building a wider environment for peace.

Until now, the Taliban and Afghan officials only made indirect contacts.

The official's remarks signaled unprecedented optimism from Afghanistan that Pakistan - long accused of backing Afghan insurgent groups - was now willing to put its weight behind reconciliation efforts, which are still in early stages and are vulnerable to factionalism.

"We are very optimistic. We believe that they are genuine in this discussion with us," said the senior government official.

The senior official cautioned, however, that in order to sustain that optimism, Pakistan would need to take further concrete steps after releasing some mid-level Afghan Taliban members from detention, who may be useful in promoting peace.

The nuclear-armed South Asian nation, a strategic U.S. ally, is seen as critical to U.S. and Afghan efforts to stabilize the country before most NATO combat troops withdraw by the end of 2014.

WARRING FACTIONS

Pakistan's powerful army chief has made reconciling warring factions in Afghanistan a top priority, Pakistani military officials and Western diplomats told Reuters, the clearest signal yet that Islamabad means business in promoting peace with the Taliban.

General Ashfaq Kayani, arguably the most powerful man in Pakistan, is backing dialogue partly due to fears that the end of the U.S. combat mission in Afghanistan in 2014 could energize a resilient insurgency straddling the shared frontier, according to commanders deployed in the region.

The senior Afghan government official has a similar assessment.

"I think there is a sense that we are also getting, that cooperation from Pakistan now is bound to be meaningful, substantive," he said.

"The reason is frankly, most in Pakistan, in our view, have reached the conclusion that time is running out. That it is no longer just about Afghanistan's instability and Afghanistan's insecurity but it's very much a question of security for themselves."

The Haqqani network -- which has far more experience in guerrilla warfare than the Afghan Taliban - would be welcomed to the peace process as long as it met certain conditions, said the official.

"From our point of view, the door of peace is open to anyone. The Haqqanis are a pretty challenging group of people," he said.

"But if they choose to come over to the peace process, then I am sure the peace process will include them."

Pakistan's intelligence agency denies Afghan accusations that it uses the Haqqani network and other militant groups as proxies to counter the influence of rival India in Afghanistan.

The Haqqanis are blamed for a number of high-profile attacks on Western targets, including embassies, in Kabul, highlighting the resilience of insurgents after years of fighting Western forces equipped with superior firepower and technology.

(Additional reporting by Mehreeen Zahra Malik in WANA and Matthew Green in ISLAMABAD; Editing by Sanjeev Miglani)

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1 of 2. Italian caretaker Prime Minister Mario Monti gestures during an end of the year news conference in Rome December 23, 2012. Monti said on Sunday that he would be ready to offer his leadership to political forces that adopt his agenda of reforms the country needs.

ROME | Sun Dec 23, 2012 4:13pm EST

ROME (Reuters) - Two days after stepping down, Mario Monti announced on Sunday he would consider seeking a second term as Italian prime minister if approached by allies committed to backing his austere brand of reforms.

The former European commissioner, appointed to lead an unelected government of experts to save Italy from financial crisis a year ago, resigned on Friday but has faced growing calls to seek a second term at a parliamentary election on February 24-25.

At stake is the leadership of the world's eighth largest economy, where recession and public debt of more than 2 trillion ($2.63 billion) have aggravated investor concerns about growth and stability in the euro zone.

"If a credible political force asked me to be candidate as prime minister for them, I would consider it," said Monti, who has imposed repeated tax hikes and spending cuts to shore up Italy's strained public finances.

He had kept his position a closely guarded secret for weeks, and in recent days had appeared to be have strong doubts about whether to continue in front-line politics. He made clear that if he ran, it would probably be at the head of a centrist grouping.

Monti held back from committing himself fully to the race, and said he was aware any decision to stay in politics carried "many risks and a high probability of failure".

"I am not in any party. I am ready to give my appreciation and encouragement, to be leader and to take on any responsibility I may be given by parliament," he said.

As a senator for life, Monti has no need to run for election to parliament but he said he would publish a detailed agenda of recommendations for a future government and would potentially be willing to lead a party that adopted it as its own.

Still serving as caretaker leader, Monti is widely respected for restoring Italy's reputation after the scandal-plagued era of his predecessor Silvio Berlusconi.

The former economics professor is backed strongly by Italy's business establishment and by EU allies including German Chancellor Angela Merkel. He has been urged to stay by centrist groups ranging from disaffected former Berlusconi allies to the small UDC party, which is close to the Catholic church.

But there is little sign of enthusiasm for a second term among voters weary of his austerity policies. A survey last week showed 61 percent did not think he should stand. It said a potential centrist alliance under his leadership was likely to gain around 15 percent support.

BITTER ELECTION

Both Berlusconi's center-right People of Freedom (PDL) party and the center-left Democratic Party (PD), which is leading in the opinion polls, have urged Monti not to stand in the election.

Berlusconi, who left office last year with fraud charges and a juvenile prostitution scandal hanging over him, has accused Monti's "Germano-centric" government of worsening recession with austerity measures, including a deeply unpopular housing tax he has promised to scrap.

In an exchange which may give a taste of bitter campaigning to come, Berlusconi said his nightmare would be a government with Monti at its head and Gianfranco Fini, a former ally turned bitter foe who supports the premier, "coming out of the sewers".

Fini's lieutenant Fabio Granata responded by saying Berlusconi's remark was "fitting for his court of thieves, mafiosi, corrupt politicians, slaves and prostitutes."

Monti was also scathing about Berlusconi, whom he replaced as Italy teetered on the brink of disaster in November 2011.

He said he had been "bewildered" by the 76-year-old media tycoon's frequent changes of position. And, in an interview with La Repubblica daily, he expressed incredulity that Italians might re-elect Berlusconi "after seeing the damage he did to the Italian economy and the credibility of the country".

PD leader Pier Luigi Bersani, whose party has backed Monti in parliament and pledges to maintain the broad course he has set, was more cautious, saying he would look at Monti's reform proposals closely but that it would be up to voters to decide.

Monti said he hoped the next government would have a strong majority to pursue a programme that would extend the reforms his government had begun, in areas ranging from the labor market to justice and cutting the bloated cost of the political system.

He said the next government must not make easy election promises or backtrack on reforms: "We have to avoid illusory and extremely dangerous steps backwards."

During his 13 months in office, Monti hiked taxes severely and chopped backed spending while pushing through reforms of the pension system, labor market and parts of the service sector.

However, many analysts said his efforts were too timid to significantly improve the outlook of a chronically sluggish economy, and Monti himself said that Italy was "only at the beginning of the structural reforms" required.

Italy, the euro zone's third-largest economy, has been in recession since the middle of last year. Consumer spending is falling at its fastest rate since World War Two and unemployment has risen to a record high above 11 percent.

(Editing by Barry Moody and Mark Trevelyan)

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BEIRUT | Sun Dec 23, 2012 3:34pm EST

BEIRUT (Reuters) - Dozens of people were killed and many more wounded in a Syrian government air strike that hit a bakery where a crowd was queuing for bread on Sunday, activists said.

If confirmed, the attack on Halfaya in central Syria, which was seized by rebels last week, would be one of the deadliest air strikes of Syria's civil war.

Videos uploaded by activists showed dozens of bloodstained corpses lying amid rubble and shrapnel. An adolescent boy with both his feet blown off lay flailing in the middle of a road.

"When I got there, I could see piles of bodies all over the ground. There were women and children," said Samer al-Hamawi, an activist in the town. "There are also dozens of wounded people."

Residents of Halfaya told Reuters they estimated 90 dead. The Syrian Observatory for Human Rights, a British-based group with a network of activists across Syria, counted 60 killed.

"The number is likely to rise because there are dozens of wounded being treated in the area and nearby hospitals, among them 50 in critical condition," it said.

Activists say more than 44,000 people have been killed in the 21 months since protests erupted against President Bashar al-Assad, inspired by the Arab Spring revolutions in Tunisia, Egypt and elsewhere.

Amid the latest carnage, United Nations-backed crisis mediator Lakhdar Brahimi arrived for more talks in Syria. He had to drive from neighboring Lebanon because fighting around Damascus International Airport has effectively shut it down.

"TIME IS GETTING SHORT"

The uprising has grown into civil war, with death tolls regularly topping 100 people a day as the army hits back at rebels who have made a string of advances across the country, including around the capital. According to the Observatory, more than 180 Syrians, civilians and fighters, died on Sunday.

A force of 200 rebel fighters seized the 135 Infantry Brigade base in the village of Hawa, a mostly Kurdish area in northern Aleppo province, rebels said on Sunday, as they showed journalists the base.

After overcoming about 150 soldiers in the raid on Saturday, they seized weapons including two field guns, three anti-aircraft guns and dozens of boxes of Kalashnikov assault rifles, they said.

In defiant remarks, Syrian Information Minister Umran Ahid al-Za'bi said rebels and their foreign allies should "forget" trying to topple Assad.

He appeared to move away from the conciliatory tone of the Syrian vice president, who said last week that neither side could win the war and called for a national unity government.

"These military efforts to try to topple the government, of getting rid of the president, of occupying the capital ... Forget about this," al-Za'bi told a news conference in Damascus.

"I have general advice to those political powers that reject dialogue: time is getting short. Hurry and move on to working on a political solution."

Brahimi, who replaced Kofi Annan after the former U.N. chief failed to get Assad and world powers to agree on a way to end the conflict, was expected to meet the president on Monday.

Western powers and some Arab countries have repeatedly demanded that Assad step down.

BREAD SHORTAGE

Witness Hamawi said more than 1,000 people had been queuing at the bakery in the town of Halfaya. Shortages of fuel and flour have made bread production erratic across the country, and people often wait hours to buy loaves.

"We hadn't received flour in around three days so everyone was going to the bakery today, and lots of them were women and children," Hamawi said. "I still don't know yet if my relatives are among the dead."

New York-based Human Rights Watch condemned army air strikes on bakeries earlier this year, arguing that in some incidents the Syrian military was not using enough precision to target rebel sites, and in other instances it may have intentionally hit civilians.

In video from the attack site, women and children cried and screamed as men rushed with motorbikes and vans to carry away victims.

There was no independent media access to the scene, as the government restricts press access in Syria.

In one video, the cameraman could be heard sobbing as he filmed. "God is great, God is great. It was a war plane, a war plane," he cried.

One man was seen stopping to pick up half a corpse lying in the street, wrapping it up in his own jacket and carrying it away. Residents were using their bare hands to dig for bodies underneath blocks of concrete.

"Where are the Arabs, where is the world?" shouted one man. "Look at all of these bodies!"

(Writing by Mark Trevelyan; Additional reporting by Yara Bayoumy in Hawa.; Editing by Kevin Liffey, Stephen Powell and Jason Webb)

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KADUNA, Nigeria | Sun Dec 23, 2012 6:15pm EST

KADUNA, Nigeria (Reuters) - Nigerian Islamist group Ansaru said on Sunday it was behind the kidnap of a French national last week, citing France's ban on full-face veils and its support for military action in Mali.

Ansaru sent a message to Nigerian reporters saying it was holding 63-year-old Francis Colump, who was taken on December 19 when around 30 gunmen attacked his residence in the remote northern town of Rimi, close to the Niger border.

The Nigerian police declined to comment on the claim but had already named Colump as the man abducted. He was working for French renewable energy firm Vergnet, which had been building Nigeria's first wind farm.

"The reason we kidnapped him is ... the law the government created which prohibits the wearing of niqab by French Muslim women. This is a denial of their religious rights," said the statement by the group, written in the local Hausa language.

"And again the participation of France in supporting the military attack on Muslims in northern Mali," the message signed by the group's purported leader Abu Usamata Ansari said.

In recent months France has led support for an African-led force to help defeat al Qaeda and other Islamist militants in northern Mali. Military deployment has the backing of the U.N. Security Council.

Last year, France banned full face veils.

Ansaru's full name is Jama'atu Ansarul Musilimina Fi Biladis Sudan, which roughly translates as "Vanguards for the Protection of Muslims in Black Africa".

The group, thought to be a breakaway from better known Islamist sect Boko Haram, has risen to greater prominence in recent weeks.

It claimed responsibility for a dawn raid on a major police station in the Nigerian capital last month, where it said hundreds of prisoners were released.

Britain last month put Ansaru on its official "terrorist group" list, saying it was aligned with al Qaeda and was behind the kidnap of a British and a Italian killed earlier this year during a failed rescue attempt.

Ansaru is thought to have loose ties to Boko Haram, which has killed hundreds this year in an insurgency focused mostly on Nigerian security forces, religious targets and politicians, rather than foreigners.

Western governments are increasingly concerned about Islamists in Nigeria linking up with groups outside the region, including al Qaeda's north African wing.

Colump's kidnap takes to nine the number of French citizens currently held hostage in Africa: seven others are in the arid Sahel belt and one in Somalia.

France's Intelligence agency said last week it believed "terrorist" links were behind the latest abduction.

"We are informing the government of France that we would continue to attack ... its citizens anywhere in the world as long as the government does not retract on its policies," Ansaru's statement said. ($1 = 0.7590 euros)

(Additional reporting and writing by Joe Brock; editing by Jason Webb)

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1 of 2. A policeman uses a baton to disperse a demonstrator during a protest in front of India Gate in New Delhi December 23, 2012.

NEW DELHI | Mon Dec 24, 2012 2:24am EST

NEW DELHI (Reuters) - Indian authorities throttled movement in the heart of the capital on Monday, shutting roads and railway stations in a bid to restore law and order after police fought pitched battles with protesters enraged by the gang rape of a young woman.

In an unusual televised address, Prime Minister Manmohan Singh appealed for calm after the weekend clashes in New Delhi and vowed to punish the rapists for their "monstrous" crime.

Singh's government, often accused by critics of being out of touch with the aspirations of many Indians, has been caught off-guard by the depth of the popular outrage as protests have snowballed and spread to other cities. India is seen as one of the most unsafe places in the world to be a woman.

Instead of channeling the outrage, the government has found itself on the defensive over the use of force against the mostly student protesters in New Delhi and complaints that it has done little to create a safer environment for women.

The protests have been the biggest in the capital since 2011 demonstrations against corruption that rocked the government.

"As in much else, this government is clueless as to what India aspires to and demands," Mint newspaper said in an editorial.

Police barricaded roads leading to India Gate, an imposing Arc de Triomphe-style war memorial in the center of the city, that has become a hub of the protests by mostly college students. Many metro rail stations in fog-shrouded Delhi were also closed, crippling movement around the city of 16 million.

The 23-year-old victim of the December 16 attack, who was beaten, raped for almost an hour and thrown out of a moving bus in New Delhi, was still in a critical condition on respiratory support, doctors said.

In the weekend spasm of violent protests, police use batons, teargas and water cannon against demonstrators around the capital. Protests have also taken place in other Indian cities but they have been more peaceful.

"I appeal to all concerned citizens to maintain peace and calm. I assure you we will make all possible efforts to ensure security and safety of women in this country," Singh said in his televised address to the nation.

Singh has been under fire for remaining largely silent since the rape. He issued a statement for the first time on Sunday, a week after the crime. Sonia Gandhi, chief of the ruling Congress Party, has met some of the protesters to hear their demands.

Comments by political commentators, sociologists and protesters suggest the rape has tapped into a deep well of frustration that many Indians have over what they see as weak governance and poor leadership on social and economic issues.

"There is a huge amount of anger. People are deeply upset that despite so many incidents there has not been much response from the state and the government," said social activist Ranjana Kumari, director of the Centre for Social Research in Delhi.

SOCIAL MEDIA SITES DRIVE PROTESTS

New Delhi has the highest number of sex crimes among India's major cities, with a rape reported on average every 18 hours, according to police figures. A global poll by Thomson Reuters Foundation in June found that India was the worst place in the world to be a woman because of high rates of infanticide, child marriage and slavery.

Since last week's rape, the authorities have promised better police patrolling to ensure safety for women returning from work and entertainment districts, the installation of global positioning system devices on public transport vehicles, more buses at night, and fast-track courts for swift verdicts on cases of rape and sexual assaults.

But protesters view those measures as inadequate and are looking for the government to take a firmer stand on sexual assaults, most of which go unreported.

Opposition political parties, normally quick to exploit the government's vulnerabilities, have largely been sidelined in the protests, which have mostly been organized through social media networking sites such as Twitter and Facebook.

The protesters come from all walks of life but many are young and middle class with growing aspirations after a decade of rapid economic growth.

Noting the youth of the protesters, Mint newspaper said "the protests against the brutal assault is only a metaphor of their general dissatisfaction.

"The new India promises much but delivers little. There are no jobs to absorb the 12 million joining the workforce every year."

The protesters' focus has been on the rape case rather than on other grievances. They are demanding more steps from the authorities to ensure safety for women - particularly better policing - and some want the death penalty for those convicted.

(Additional reporting By Arup Roychoudhury and Satarupa Bhattacharjya, writing by Ross Colvin,; Editing by John Chalmers and Robert Birsel)

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KABUL | Mon Dec 24, 2012 2:03am EST

KABUL (Reuters) - An Afghan policewoman shot dead on Monday a U.S. forces member in the compound of the chief of police in the capital, Kabul, police and Afghanistan's NATO-led force said.

"A U.S. police adviser was killed in an attack by an Afghan policewoman," a spokesman for the NATO force said.

Mohammad Zahir, head of the police criminal investigation department, described the incident as an "insider attack" in which Afghan forces turn their weapons on Western troops they are supposed to be working with.

It appeared to be the first time that a woman member of Afghanistan's security forces shot a member of the Western coalition in an insider attack.

The incidents have undermined trust between coalition and Afghan forces who are under mounting pressure to contain the Taliban insurgency before most NATO combat troops withdraw by the end of 2014.

At least 52 members of the NATO-led International Security Assistance Force have been killed this year by Afghans wearing police or army uniforms.

(Reporting by Mirwais Harooni; Writing by Michael Georgy; Editing by Robert Birsel)

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Policemen stand guard near a banner outside the constitutional court put up by supporters of Egyptian President Mohamed Mursi as they stage a sit-in, in Cairo December 23, 2012. Mursi will have little time to savour victory in pushing through a new constitution as it may have cost the Islamist leader broader support for urgent austerity measures needed to fix the creaking economy. The banner reads, ''We support you against corruption!''

CAIRO | Mon Dec 24, 2012 2:12am EST

CAIRO (Reuters) - Egyptian President Mohamed Mursi will have little time to savor victory in pushing through a new constitution as it may have cost the Islamist leader broader support for urgent austerity measures needed to fix the creaking economy.

By fast-tracking the constitution through to a referendum that the opposition said was divisive, he may have squandered any chance of building a consensus on tax rises and spending cuts that are essential to rein in a crushing budget deficit.

Unofficial tallies from Mursi's Muslim Brotherhood showed the charter was approved by a 64 percent majority. But opponents said he lost the vote in much of the capital, while across the nation he alienated liberals, Christians and others worried by the text that was drafted by an Islamist-dominated assembly.

Opponents say such divisions will fuel more unrest in a nation whose economy has been pummeled by turbulence since Hosni Mubarak was overthrown almost two years ago, scaring off investors and tourists that are both vital sources of capital.

Without broad support, Mursi's government will find it harder to implement reforms needed to secure a $4.8 billion loan from the International Monetary Fund. The Muslim Brotherhood's party, which propelled Mursi to office, may also face a tougher fight in a parliamentary election expected in about two months.

"For austerity measures to be made at a time when the political system is being opened and millions of people are being enfranchised, you need political consensus within the political class," said Amr Adly, an expert on the economy.

Yet, even though there is broad acceptance of the urgency of fixing the battered economy, Adly said Mursi's approach in pushing through a constitution that angered opponents would encourage his rivals to capitalize on any public backlash against austerity rather than help sell reforms to the nation.

"His political rivals are already dealing with these problems on a very opportunistic basis," said Adly, head of the social and economic justice unit at the Egyptian Initiative for Personal Rights. "There won't be any prospect of ending ... violence in the streets or very deep political divisions."

UNITED

Egypt's fractured opposition, defeated at the ballot box by Islamists in each poll since Mubarak was overthrown in February 2011, unified their ranks after Mursi expanded his powers in a decree on November 22 to push through the constitution.

"What Mursi did has united us," said Ahmed Said, head of the liberal Free Egyptians Party and a leading member of the National Salvation Front coalition, adding he expected a unified approach to the upcoming parliamentary election.

That would give the opposition a much better chance in parliamentary polls against disciplined Islamists, who have built a broad grass-roots network across the nation over decades that liberals and other non-Islamists cannot yet match.

Though Said agreed steps were needed to fix Egypt's economy, he said Mursi had made no effort to discuss it with his rivals although they were a national concern. The IMF has long said a broad political consensus to reforms was needed for a loan.

"Who wouldn't agree with economic reforms?" Said asked, but added: "We have not been consulted at all with regard to supporting such policies or not, we are not sure what is going on in the country."

Mursi now faces the prospect of having an opposition seeking to score political points from any tax rises and measures to reduce spending, particularly steps to rein in fuel subsidies in a nation where rich and poor have become used to cheap energy.

That could make it more of a challenge for Islamists to win votes in the parliamentary election.

Though the opposition have drawn tens of thousands of Egyptians to the streets on occasion, Islamists have done so with greater regularity and also have a strong record of getting out the vote in the more local politics of a parliamentary poll.

But nation's political divisions have already taken their toll on the president's initial economic reforms.

Shortly before the referendum, Mursi introduced increases on the sales tax on goods and services that ranged from alcoholic beverages, cigarettes and mobile phone calls to automobile licenses and quarrying permits. He withdrew them within hours under criticism from his opponents and the media.

An immediate result of Mursi's policy U-turn was a delay in approving the IMF loan. The IMF said it would postpone its meeting in mid-December to approve the loan. Egypt's government said it might now be approved in January.

Farid Ismail, a senior official in the Brotherhood's Freedom and Justice Party, said Egypt could not be described as divided when two-thirds of those who voted backed the constitution but said all sides needed to discuss the economic issues ahead.

"We have an economic and social challenge and this is the time for people to present initiatives and engage in a national dialogue," he said, adding that passing the constitution meant one major hurdle to stabilizing the nation had been overcome.

EXPECTATIONS

Yet expectations run high in a nation where demands for social justice and a better standard of living helped drive the 2011 uprising as much as calls for political freedoms.

"We had a revolution to make life easier and prices lower, not higher," said 19-year-old student Sally Ahmed Kotb referring to Mursi's tax plans as she went to the polls on Saturday to vote "no". "This will lead to a hunger revolution."

Once a darling of emerging market investors, Egypt's economy has taken a hammering. The budget deficit surged to a crippling 11 percent of gross domestic product in the financial year that ended in June 2012 and is forecast to exceed 10 percent this year.

Without swift action, it could hit 13 percent, said Adly.

Among belt-tightening measures in the pipeline are steps to reduce how much subsidized gasoline drivers can buy, which is bound to be unpopular.

In the meantime, Egypt has been bleeding foreign reserves at a rate of about $600 million a month, cutting them to about $15 billion, less than half their level before Mubarak's fall.

Some Egyptians are still ready to give Mursi a chance. Many of those who voted "yes" in the referendum backed the charter as a vote for "stability", even if they had some reservations. But, even from supporters, Mursi may have limited leeway.

"Just as people rose against Mubarak, they can rise against Mursi," said Mohamed Mohsen, a civil servant and Islamist backer who voted "yes" in the referendum. "Let's give him two, three, four or five months to solve our problems then we can see."

The government says it is already engaged in a "national dialogue" with political forces, unions and others to win public support for an economic plan it insists will not hurt the poor.

"Passage of the new constitution is unlikely to ease recent discord, but it nevertheless marks a significant step forward in Egypt's labored political transition," Simon Williams, HSBC economist in Dubai, wrote in a note after the constitution was approved in the first of the two-stage referendum.

He said progress on the IMF program could now resume swiftly, but added: "The temptation to avoid pressing ahead with unpopular policy measures may also prove ever harder to resist, particularly ahead of the parliamentary polls."

(Additional reporting by Shaimaa Fayed and Tamim Elyan; writing by Edmund Blair; editing by Giles Elgood)

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TOKYO | Sun Dec 23, 2012 11:54pm EST

TOKYO (Reuters) - Incoming Japan Prime Minister Shinzo Abe might ask upper house lawmaker Yoriko Kawaguchi to return for another stint as foreign minister, Kyodo reported on Monday.

Japan's next foreign minister will serve against a backdrop of rising tensions with China, over a territorial dispute involving uninhabited isles in the East China Sea. Abe has called for a tougher stance toward China.

Abe is now deciding on the lineup for his Cabinet, which is likely to be formally inaugurated on Wednesday, Kyodo said.

Kawaguchi, a career diplomat, served as foreign minister from 2002-2004 under Prime Minister Junichiro Koizumi, and she also served as environment minister in 2001 under Prime Minister Yoshiro Mori.

Some members of Abe's Liberal Democratic Party, which swept to victory in Japan's December 16 election, favor giving the foreign minister post to former financial services minister Toshimitsu Motegi or to former LDP secretary general Nobuteru Ishihara, the Kyodo report said.

Motegi is also being considered as a candidate for economy, trade and industry minister or internal affairs and communications minister.

Abe is likely to tap former defense minister Yuriko Koike as LDP policy chief, a separate Kyodo report said.

(Reporting by Lisa Twaronite; Editing by Michael Perry)

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Russian President Vladimir Putin looks on during a joint news conference with European Council President Herman Van Rompuy and European Commission President Jose Manuel Barroso (unseen) following a European Union-Russia summit in Brussels December 21, 2012.

MOSCOW | Sun Dec 23, 2012 7:05pm EST

MOSCOW (Reuters) - Arms sales will be on the agenda when Russian President Vladimir Putin visits India on Monday to court a country that has traditionally been a top client.

Putin's trip, his first to India since he started a new Kremlin six-year term in May, is a chance to reaffirm Russia's interest in India, long a regional ally and now a partner in the BRICS group of emerging market nations.

In an article for publication in the Indian newspaper The Hindu on Monday, Putin stressed that "deepening friendship and cooperation with India is among the top priorities of our foreign policy".

"India and Russia show an example of responsible leadership and collective actions in the international arena," he wrote, a veiled swipe at the West and in particular the United States, whom Putin accuses of seeking to impose its will on the world.

Russian defense industry sources said the visit could produce deals on the sale of fighter jets and aircraft engines worth more than $7.5 billion. One said that could include the sale of 42 Sukhoi Su-30MKI fighters and a deal on the long-term supply of 970 warplane engines.

The Kremlin said it expected the signing of "a number of large contracts in the area of military-technical cooperation", a term referring to weapons sales, licensing and servicing.

However, warm ties dating back to the Soviet era have been complicated by recent Russian efforts to improve relations with Pakistan, one of Moscow's proxy enemies during the Soviet Union's war of occupation in Afghanistan in the 1980s.

Relations between the world's second biggest arms exporter Russia and India, its largest buyer last year, have also run into sporadic problems including delays in the delivery of a reconditioned Soviet-built aircraft carrier, now expected late in 2013.

MILITARY MIGHT

India plans to spend about $100 billion over the next 10 years to upgrade its largely Soviet-era military equipment, as Asia's third largest economy looks to match its economic might with military power and warily eyes assertive Asian rival China.

Moscow has warm political ties with China, another ally in opposing U.S. clout and a key consumer of the oil and gas that drives Russia's economy, but is thought to also be wary of a faster-growing neighbor with nearly 10 times its population.

India relies on Russia for 60 percent of its arms purchases, but has diversified its suppliers in recent years.

Putin announced record arms sales this year but wants to minimize the effect of the loss of deals with Libya and of uncertainty about the future of longtime client Syria on Russia's defense industry, an important source of political support for him.

Putin, whose country took up the presidency of the G20 this month, also hopes for strong growth in overall trade with India.

In his article, he said the volume of bilateral trade with India was expected to reach a record $10 billion this year, after declining due to the global financial crisis, and set a target of doubling that to $20 billion by 2015.

For Putin, who will meet Prime Minister Manmohan Singh, President Pranab Mukherjee and senior lawmakers, India is the most distant destination since rumors of a back problem emerged after he was seen limping in September.

He had originally been expected to travel to India last month but the Kremlin has dismissed suggestions he has serious health problems, and Putin implied last week that such talk was politically motivated.

(Writing by Steve Gutterman; Editing by Andrew Osborn)

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