By Alistair Lyon and Yasmine Saleh
CAIRO (Reuters) - Mohamed Mursi was sworn in on Saturday as Egypt's first Islamist, civilian and freely elected president, reaping the fruits of last year's revolt against Hosni Mubarak, although the military remains determined to call the shots.
The military council that took over after Mubarak's overthrow on February 11, 2011, formally handed power to Mursi later in an elaborate ceremony at a desert army base outside Cairo.
At the ceremony, Mursi hailed what he called a unique model of "how power is transferred from the Egyptian military forces by the will of the people to an elected, civilian power", praising the army for keeping its promise to do so.
Field Marshal Hussein Tantawi, who saluted Mursi when he arrived at Heikstep army base for the televised occasion, said: "Now we have an elected president who takes over the keys for ruling Egypt through a direct and free vote."
The handover of power to an Islamist by a military that long backed Mubarak and his suppression of the Muslim Brotherhood was just one moment in a day rich in images that told of how much Egypt has changed, as well as the fragility of its transition.
Egypt remains in political limbo, without a constitution, a lower house of parliament or any clarity about the role of a military anxious to stay in the driving seat, as Islamists and others challenge its right to do so.
Mursi, a bearded engineer who turned to the Brotherhood as a graduate student in Los Angeles, is Egypt's first civilian leader since army officers toppled the king in 1952.
For the 84-year-old Brotherhood, banned and repressed by Mubarak, it marks a dramatic reversal of fortunes.
"God is greatest, above all," said Mursi, 60, at Cairo University at the start of a speech after swearing his oath of office at the Supreme Constitutional Court.
"Egypt will not go backwards," Mursi said, pledging to keep the country on a democratic course, but saying it would not "export the revolution" or interfere in the affairs of others.
"We carry a message of peace to the world," Mursi said, reaffirming Egypt's commitment to international agreements, which include its U.S.-brokered 1979 peace treaty with Israel.
Israel has watched the rise of the Brotherhood in Egypt with apprehension since the fall of Mubarak, who staunchly upheld peace with the Jewish state, even if relations were never warm.
Mursi pledged to work to end bloodshed in Syria, scene of the most violent of a string of Arab uprisings.
WRANGLING OVER VENUE
The president was sworn in by the constitutional court, instead of parliament as is usual, because the court dissolved the Islamist-led lower house earlier this month amid a raft of measures to ensure enduring military influence.
The Nile-side constitutional court building where Mursi took his oath is next to the plush military hospital where Mubarak was transferred last week from the prison where he had begun a life term for failing to stop police killings of protesters.
The Brotherhood reluctantly accepted the venue, but in a symbolic riposte, Mursi read his oath on Friday to crowds in Cairo's protest hub, Tahrir Square. He told supporters there that the people were the only source of power, in a dig at the generals who see themselves as the state's ultimate arbiters.
The new president won a standing ovation when he recited his vow for a third time during his speech at Cairo University, delivered from the podium used by U.S. President Barack Obama to reach out to the Islamic world in 2009, early in his term.
An honor guard, artillery salute and the national anthem greeted Mursi at the university, where "No SCAF", the acronym for the ruling Supreme Council of the Armed Forces, was scrawled on a wall visible on television as he drove in.
In the audience were women in full Islamic face veils or headscarves, some waving portraits of "martyrs" killed in the anti-Mubarak uprising. Christian priests sat alongside Muslim clerics and men in suits or robes, some with beards.
When Egypt's military chief Tantawi arrived, some applauded, while others chanted "Down with military rule".
Tantawi's SCAF has guided a chaotic and sometimes bloody transition since Mubarak's overthrow, holding elections, but issuing arbitrary and often contradictory decrees, while the economy shrank, increasing hardship for millions of Egyptians.
An army decree on June 17 clipped presidential powers, denying the head of state his role as supreme commander of the armed forces with the right to decide on war and peace. It also gave SCAF legislative powers until a new parliament is elected, as well as veto rights over the writing of a new constitution.
TUSSLE FOR POWER
Much remains uncertain, with a protracted struggle likely as Islamists seek to roll back the control of a once all-powerful military, as their counterparts in Turkey have done.
An assembly that is supposed to write a new constitution has begun work after its predecessor fell apart amid disputes over whether Islamists were over-represented, in a country with a 10 percent Christian minority and many secular-minded liberals.
Egypt's 82 million people are more polarized than ever.
Mursi narrowly won a run-off vote against Ahmed Shafik, a former air force chief and Mubarak's last prime minister, but many voters were dismayed at having to choose between an Islamist and a man seen as a remnant of Mubarak's era.
Egypt will find it hard to attract the investment, loans and foreign aid it needs to revive an economy blighted by months of turmoil and uncertainty until political stability returns.
The International Monetary Fund's head, Christine Lagarde, called Mursi to discuss Egypt's economic challenges and how the IMF can best help, an IMF spokeswoman said on Friday.
Lagarde hailed Mursi's election as "an important step forward in Egypt's transition", but the Fund has set no date for a staff visit to discuss a proposed $3.2 billion IMF loan, pending the formation of a new government.
In Tahrir, where demonstrators have camped out for weeks to demand an end to military rule, one man said the protest would go on. "We will not leave until parliament is restored and the president gets all his authorities," said Mahmoud Arafa, 41.
Arafa, a shopkeeper from Shabin al-Kom in the Nile Delta, said he wanted Mursi to fulfill the promises he made for his first 100 days in office. "If he cannot, we will help him."
The Muslim Brotherhood's programme calls for swift measures with an immediate social impact, pledging to get traffic moving, restore security, collect rubbish, and clear bottlenecks in the distribution of subsidized bread, petrol and cooking gas.
"For the first time in my life I feel we have elected a leader through our own free will," said Mustafa Abu Hanafi, 31, an unemployed computer engineer from Giza.
"When someone graduates he's supposed to have a job," he said. "You always needed 'wasta' (connections). Under Mursi this will change ... He's one of us."
(Additional reporting by Edmund Blair, Marwa Awad, Patrick Werr and Omar Fahmy; editing by Andrew Roche)
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