UPDATE 5-Egypt's opposition rejects constitutional referendum

* Opposition says vote could drag Egypt into violence

* Islamist president has set referendum for Dec. 15

* Muslim Brotherhood urges opposition to accept vote

CAIRO, Dec 9 (Reuters) - Egypt's main opposition coalition

rejected on Sunday Islamist President Mohamed Mursi's plan for a

constitutional referendum this week, saying it risked dragging

the country into "violent confrontation".

Mursi's decision on Saturday to retract a decree awarding

himself wide powers failed to placate opponents who accused him

of plunging Egypt deeper into crisis by refusing to postpone the

vote on a constitution shaped by Islamists.

"We are against this process from start to finish," Hussein

Abdel Ghani, spokesman of the National Salvation Front, told a

news conference, calling for more street protests on Tuesday.

The Front's main leaders - Nobel peace laureate Mohamed

ElBaradei, former Foreign Minister Amr Moussa and leftist

Hamdeen Sabahy - did not attend the event.

Hundreds of protesters milled around Mursi's palace, despite

tanks, barbed wire and other barriers installed last week after

clashes between Islamists and their rivals killed seven people.

"Holding a referendum now in the absence of security

reflects haste and an absence of a sense of responsibility on

the part of the regime, which risks pushing the country towards

violent confrontation," a statement from the Front said.

The Muslim Brotherhood, which propelled Mursi from obscurity

to power, urged the opposition to accept the referendum's

verdict.

Islamists say the vote will seal a democratic transition

that began when a popular uprising toppled Hosni Mubarak 22

months ago after three decades of military-backed one-man rule.

Their liberal, leftist and Christian adversaries say the

document being fast-tracked through could threaten freedoms and

fails to embrace the diversity of Egypt's 83 million people.

"ACT OF WAR"

Mursi had given some ground on Saturday when he annulled the

fiercely contested decree issued on Nov. 22 that gave him extra

powers and shielded his decisions from judicial review.

But some measures taken under the decree remain in force and

the president has insisted the referendum go ahead on Dec. 15.

Liberal opposition leader Ahmed Said earlier described the

race to a referendum as an "act of war" against Egyptians.

Egypt is torn between Islamists, who were suppressed for

decades, and their rivals, who fear religious conservatives want

to squeeze out other voices and restrict social freedoms. Many

Egyptians just crave stability and economic recovery.

Brotherhood spokesman Mahmoud Ghozlan said the scrapping of

Mursi's decree had removed any reason for controversy.

"We ask others to announce their acceptance of the

referendum result," he said on the group's Facebook page, asking

whether the opposition would accept "the basics of democracy".

The cancellation of Mursi's decree, announced after a

"national dialogue" on Saturday boycotted by almost all the

president's critics, has not bridged a deep political divide.

Prime Minister Hisham Kandil, a technocrat with Islamist

leanings, said the referendum was the best test of opinion.

"The people are the makers of the future as long as they

have the freedom to resort to the ballot box in a democratic,

free and fair vote," he said in a cabinet statement.

But opposition factions, uncertain of their ability to vote

down the constitution against the Islamists' organisational

muscle, want the document redrafted before any vote.

"A constitution without consensus can't go to a referendum,"

said Hermes Fawzi, 28, a protester outside the palace. "It's not

logical that just one part of society makes the constitution."

DIALOGUE

Egypt tipped into turmoil after Mursi grabbed powers to stop

any court action aimed at hindering the transition. An assembly

led by the Brotherhood and other Islamists then swiftly approved

the constitution it had spent six months drafting.

Opponents, including minority Christians, had already quit

the assembly in dismay, saying their voices were being ignored.

After the dialogue hosted by Mursi, a spokesman announced

that the president had issued a new decree whose first article

"cancels the constitutional declaration" of Nov. 22. He said the

referendum could not be delayed for legal reasons.

The decree ignited more than two weeks of sometimes violent

protests and counter-rallies in Egypt. Mursi's foes have chanted

for his downfall. Islamists fear a plot to oust the most

populous Arab nation's first freely-elected leader.

Islamists reckon they can win the referendum and, once the

new constitution is in place, a parliamentary election about two

months later. The Islamist-led lower house elected this year was

dissolved after a few months by a court order.

Investors appeared relieved after Mursi rescinded his

decree, sending Egyptian stocks 4.4 percent higher on Sunday.

Markets are awaiting approval of a $4.8 billion IMF loan later

this month designed to support the budget and economic reforms.

The military, which led Egypt's transition for 16 turbulent

months after Mubarak fell, told feuding factions on Saturday

that only dialogue could avert "catastrophe". But a military

source said these remarks did not herald an army takeover.

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