By Alastair Macdonald and Yasmine Saleh
CAIRO (Reuters) - President Mohamed Mursi offered opponents a say on Wednesday in amending a controversial new constitution and a forum to seek "national reconciliation", as he sought to avert a violent showdown in the streets.
In a televised address lasting more than two and a half hours, the Islamist head of state blamed loyalists of fallen dictator Hosni Mubarak for the "paralysis" that has marked his first year in office but also offered an olive branch to opponents that also seemed to address demands from the army.
He said he was inviting party leaders to meet on Thursday to choose a chairman for an all-party committee that would prepare amendments to the constitution. It was pushed through a referendum late last year with Islamist support, but many in the opposition say the document is flawed and biased against them.
Mursi also said he was forming a committee of leading public figures, including Muslim and Christian clerics, to promote "national reconciliation".
"I say to the opposition, the road to change is clear," Mursi said, pointing to parliamentary elections expected later this year. "Our hands are extended."
The head of the armed forces warned this week that the military could step back in if politicians failed to end the polarized deadlock that has caused violence in the streets - including two deaths and scores of injuries on Wednesday.
Liberal opponents are hoping millions heed a call to rally on Sunday, the first anniversary of Mursi's inauguration, to demand he step down. Islamists have also been putting on shows of strength and plan another major demonstration on Friday.
Mursi called for calm: "I say to all those planning to take to the streets to keep the protests peaceful and not be dragged into violence as violence will only lead to violence. Protests are a way of expressing an opinion - not imposing one".
Earlier in his speech, Mursi admitted errors and offered reform but was otherwise uncompromising in his denunciation of those he blamed - some by name - for wanting to "turn the clock back" to before the 2011 revolution against Mubarak.
Interrupted by occasional cheers from Islamist supporters, Mursi told an audience that also included the head of the army that many of the difficulties of his first year in office were due to the continued influence of corrupt Mubarak-era officials.
"I took responsibility for a country mired in corruption and was faced with a war to make me fail," he said, naming some senior officials, including the man he beat in last year's presidential run-off, as well as neighborhood "thugs". He also slammed some owners of hostile media, accusing one of tax fraud.
Some enemies were abroad, he said, without elaborating.
Mursi acknowledged the hardships many of the young who saw hope in the revolution have had in an economy mired in crisis and offered them reforms and, in time, a higher minimum wage and reductions in unemployment, targeting a drop to 8 percent.
He said he wanted young people to be more involved in politics and promised parliamentary elections.
In a swipe at opponents who have failed to match his Muslim Brotherhood's disciplined approach to winning elections, he said politicians who failed to accept his offers to cooperate had left young people with no outlet for opposition but the street.
"Political polarization and conflict has reached a stage that threatens our nascent democratic experience and threatens to put the whole nation in a state of paralysis and chaos," he said. "The enemies of Egypt have not spared effort in trying to sabotage the democratic experience."
Hours before he spoke, two people were killed and more than 200 were treated for injuries in the city of Mansoura, north of Cairo, when Islamist supporters clashed with their opponents - the latest street fighting over the past few days that many fear may presage a massive showdown in the streets this weekend.
Witnesses heard gunfire and state television showed a man in hospital with birdshot wounds.
Overnight, there were also clashes in Alexandria.
The army has warned politicians it could effectively take charge again if they fail to find consensus. Some in the anti-Mursi camp might welcome that, but Islamists say they would fight any "coup" against Egypt's first freely elected leader.
Fears of a violent stand-off in the streets between Mursi's Islamist supporters and a broad coalition of the disaffected have led people to stock up on food. Long lines of cars outside fuel stations have snarled roads in Cairo and other cities.
Some observers fear Egypt may be about to erupt again, two years after the revolution that toppled Mubarak. Politics are polarized between Mursi's disciplined Muslim Brotherhood and disparate opponents who have lost a series of elections.
The deadlock has contributed to a deepening economic crisis and the government is running out of cash.
Liberal critics worry about Islamist rule - a coalition of local human rights groups accused Mursi's Muslim Brotherhood on Wednesday of crimes rivaling Mubarak's and of setting up a "religious, totalitarian state". But many Egyptians are simply frustrated by falling living standards and fear chaos.
The army is held in high regard by Egyptians, especially since it pushed aside Mubarak following the 2011 uprising.
One senior Western diplomat in Cairo said the army might try to impose a solution, especially if the political deadlock turns violent: "The margin for a political solution is definitely very narrow," he said. "If (violence) crosses a certain threshold, the role of the army might become by default more proactive."
Islamists, oppressed for decades, fear a return of military rule and hardliners warn of a fight if the generals intervene. They accuse Mubarak-era institutions, including courts, state media, police and civil service, of working to undermine Mursi.
An officer in one of Egypt's internal security agencies told Reuters this week that the country needed to be "cleansed" of the Islamists who he described as terrorists.
The army, still heavily funded by Washington as it was under Mubarak, and Western governments have been urging Mursi to bridge differences with his non-Islamist opponents. He says he has tried. They say he and his Muslim Brotherhood, along with harder line allies, are trying to monopolize the state.
At the International Crisis Group, Egypt analyst Yasser El-Shimy said he still doubted the army wanted, or would try, to take control and was more likely to push parties to compromise.
"What is going to be a game changer," he said, "is whether the violence is so massive or out of control that the government is unable to function - which might be a scenario that some are hoping for in order to prompt the military to intervene."
(Reporting by Shaimaa Fayed, Patrick Werr, Asmaa Alsharif, Tom Perry, Maggie Fick, Yasmine Saleh, Omar Fahmy, Alastair Macdonald, Alexander Dziadosz and Shadia Nasralla in Cairo; Writing by Alastair Macdonald; Editing by Tom Perry)