By Edmund Blair
CAIRO, Dec 9 (Reuters) - Egypt's president scrapped a decree that gave him extra powers and ignited violent protests, but irate opponents said on Sunday he had deepened the conflict by pressing on with a vote on a constitution shaped by Islamists.
President Mohamed Mursi and his Islamist partisans have insisted the referendum go ahead on Dec. 15 to seal a democratic transition that began when a popular uprising felled Hosni Mubarak 22 months ago after three decades of one-man rule.
The retraction of Mursi's Nov. 22 decree, announced around midnight after a "national dialogue" boycotted by almost all the president's opponents, has failed to calm a war of words.
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.
Ahmed Said, a liberal leader of the main opposition National Salvation Front, said Mursi's withdrawal of his Nov. 22 decree had not annulled its consequences, describing the race to a referendum as "shocking" and an "act of war" against Egyptians.
The Front has promised a formal response later on Sunday.
Egypt tipped into turmoil after Mursi grabbed powers to stop any court action to hinder the transition. An assembly led by Mursi's Muslim Brotherhood and other Islamists then swiftly approved the constitution it had spent six months drafting.
Liberals, leftists, Christians and others had already quit the assembly in dismay, saying their voices were being ignored.
The April 6 movement, prominent in the anti-Mubarak revolt, derided the result of Saturday's talks as "manipulation and a continuation of deception in the name of law and legitimacy".
A leftist group led by defeated presidential candidate Hamdeen Sabahy demanded the referendum be deferred until a consensus could be reached on a new draft, saying there could be "no dialogue while blood is being spilled in the streets".
But Muslim Brotherhood spokesman Mahmoud Ghozlan said scrapping Mursi's decree had removed any cause 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".
More protests were planned near Mursi's palace, despite tanks, barbed wire and other barriers installed last week after clashes between Islamists and their rivals killed seven people.
"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."
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.
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.
Each side has mobilised tens of thousands of supporters in rival rallies in Cairo and other cities. Mursi's foes have chanted for his downfall. Islamists fear a plot to oust the most populous Arab nation's first freely elected president.
Islamists reckon they can win the referendum and, once the new constitution is in place, an election for a new parliament 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 at Mursi's retraction of 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 new decree removed some parts of the old one that had angered the opposition, including an article that had given Mursi broad powers to confront threats to the revolution or the nation - wording that critics said gave him arbitrary authority.
It also dropped an article that had shielded Mursi's actions from the courts until a new parliament was elected, reflecting his distrust of a judiciary largely unreformed from Mubarak's era. But the new decree said "constitutional declarations including this declaration" remained beyond judicial review.
The new decree also set procedures to form an assembly to write a new constitution if Egyptians vote this draft down.
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.