Egypt's Islamist president takes revolution to palace

By Edmund Blair and Marwa Awad

CAIRO (Reuters) - Mohamed Mursi, Egypt's first freely elected president whose powers have already been curbed by the army, began work on a coalition on Monday after touring his new palace, once home of Hosni Mubarak who banned his movement for three decades.

Declared winner on Sunday a week after a tumultuous run-off vote that pitted him against a former air force chief, the Islamist faces the challenge of meeting sky-high expectations in a nation tired of turmoil while the economy is on the ropes.

But his campaign pledge to complete the revolution that toppled Mubarak last year but left the pillars of his rule intact will come up against the entrenched interests of the generals who are in charge of the transition to democracy.

Shortly before the historic presidential vote, a newly elected Islamist-led parliament was dissolved by the army based on a court order, and the generals issued a decree setting limits on the president's remit, which cuts into Mursi's powers to act but exposes him to blame for any failures.

Critics at home and in the West called it a "soft coup".

One pressing concern - on which many Egyptians are likely to judge his performance - will to be to revive the economy of the world's most populous Arab nation.

Monday's stock market rally, at least partly fuelled by relief that the vote and result passed off without violence, may encourage the new president, but he still has to prove to wary longer-term investors that Egypt is on the road to recovery.

Egyptian newspapers welcomed Mursi's win over Ahmed Shafik, Mubarak's last prime minister, as a victory for the people, although many more liberal-minded Egyptians worry his conservative group will slowly whittle away at social freedoms.