UPDATE 1-U.S. blames Egypt NGO crackdown on "Mubarak holdovers"
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WASHINGTON Jan 3 (Reuters) - The United States stepped up its criticism of Egypt's raids on pro-democracy groups on Tuesday, saying the crackdown was "unacceptable" and driven by remnants of former President Hosni Mubarak's regime.
"We had been assured by leaders within the Egyptian government that this issue would be resolved, that harassment would end, that NGOs would be allowed to go back to business as usual and that their property would be returned," State Department spokeswoman Victoria Nuland said.
"It is frankly unacceptable to us that that situation has not been returned to normal."
The United States reacted sharply when Egyptian authorities swooped in on some 17 non-governmental groups last week, including the U.S.-funded National Democratic Institute and International Republican Institute, both loosely affiliated with the leading U.S. political parties.
The U.S. government hinted it could review the $1.3 billion in annual military aid to Cairo if the raids continued, underscoring Washington's concern over political developments in a country seen as the lynchpin of the Middle East.
But U.S. officials said later they had been assured by top civilian and military leaders that the crackdown would stop.
Nuland said on Tuesday these assurances appeared to be hollow, and that harassment of both U.S.-backed and Egyptian non-governmental groups continued.
"We are concerned that some of the most strident statements, particularly in recent days, made by Egyptian authorities seem to be made by old, Mubarak holdover types who clearly are not on the new page with the Egyptian people," she said.
Egyptian government ministers have described the crackdown as part of an investigation into illegal funding of political activities, which they said has increased since Mubarak was toppled in an uprising last year.
Egyptian civil society groups have become increasingly vocal in criticising what they call the army's heavy-handed tactics in dealing with street unrest in recent months.
Egyptian police detained four activists on Tuesday for putting up posters critical of the ruling military council, a step a human rights lawyer said was part of an effort to neutralize the protest movement.
Nuland said the United States rejected Egyptian accusations that the NGOs are meddling in the political system, dismissing such charges as "a very aggressive propaganda effort to scare the Egyptian people."
She said the U.S.-backed groups - which run programs on training political parties and running clean elections - had pledged to operate both transparently and openly and that a senior U.S. diplomat, Assistant Secretary of State Jeffrey Feltman, would raise the issue when he visits Cairo this week.
Our hope is that the Egyptian authorities are trying to work this through ... but frankly it's taking an awfully long time," she said.
(Reporting By Andrew Quinn; Editing by Eric Beech)
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