Mubarak steps down, Posted by Meosha Eaton

* Mubarak says will step down in September
* After million march against him, chants of "Leave now!"
* Obama envoy urged Mubarak to prepare transition
* Opposition says will talk only after he leaves country
(Edits throughout, adding comment)

By Edmund Blair and Samia Nakhoul
CAIRO, Feb 1 (Reuters) - President Hosni Mubarak said on Tuesday he would step down in September, offering a mixture of concessions and defiance to Egyptians who marched a million strong to demand that his 30-year-rule end immediately.
Exhilarated by having wrought once unimagineable change on the most populous Arab state in just a week of protests, many on the streets renewed their calls for the 82-year-old leader to quit now and make way for a transitional unity government.

"We will not leave! He will leave!" some chanted in Cairo.
A leading reformist figure, retired diplomat Mohammed ElBaradei, was quoted by CNN calling Mubarak's move a "trick".

Many analysts were also incredulous that he might hang on.
Much may depend on the army, once Mubarak's power base, which appears to be trying to ensure a transition of power that would maintain the influence of the secular-minded armed forces.

U.S. President Barack Obama, who spent half an hour on the phone to Mubarak on Tuesday, is also working for stability in a country that is a linchpin of his global strategy and where the biggest opposition movement is the Islamist Muslim Brotherhood.
Under evident pressure from Obama and the army as much as from the crowds on the streets, Mubarak delivered a composed 10-minute televised statement. He appealed over the heads of the young, urban demonstrators to the wider nation of 80 million fearful of political uncertainty. The "noble youths" who had begun protests, he said, had been exploited by men of violence.

To those demanding he flee the country in the manner of his ousted Tunisian counterpart last month, Mubarak said: "This is my country ... and I will die on its soil."
But he would not give up power just yet: "I say in all honesty and regardless of the current situation that I did not intend to nominate myself for a new presidential term," he said.

"I will work in the remaining months of my term to take the steps to ensure a peaceful transfer of power."


PROTESTERS DEFIANT
Many of those on the streets in defiance of a curfew doubted his commitment to making the kind of sweeping democratic constitutional changes which he has resisted since inheriting the mantle of the ruling military establishment in 1981.
At Cairo's Tahrir, or Liberation, Square, focus of protests for a week and of unprecedented crowds of hundreds of thousands on Tuesday, young professionals in their 20s were unimpressed.

"The speech is useless and only inflames our anger," said Shadi Morkos. "If Mubarak was not going to run for a sixth term, why did he not say it before? Why does he leave the people hanging ... We will continue to protest."

In Alexandria, the second city, troops in tanks fired shots in the air to keep order after skirmishes between anti-government and pro-Mubarak groups. But there was no sign that the army was trying to halt anti-government protests.

It has said it will protect marchers and called their demands "legitimate".
Many protesters spoke of a new push on Friday, the Egyptian weekend, to rally at Cairo's presidential palace to dislodge Mubarak: "This won't fly any more," said 35-year-old doctor Ahmed Khalifa. "If Egyptians stay on the streets till Friday, probably Mubarak's next offer will be to step down right away."

Washington, Israel and the Western allies are keen to avoid a takeover by the mass Islamist movement the Muslim Brotherhood.

After Mubarak's speech, however, former U.S. deputy national security adviser Elliot Abrams, expressed scepticism that the veteran leader could bring off a smooth, slow handover:
"This just really won't work," he told CNN. "I can't see anybody in Tahrir Square accepting that he will be president for eight more months and that he would, after 30 years, be trusted to be the man in charge of the democratic transition.
"Why would anyone believe that?"


REGIONAL INSTABILITY
His departure would reconfigure the politics of the Middle East, with implications from Israel to oil giant Saudi Arabia.

King Abdullah of Jordan replaced his prime minister on Tuesday after protests. Yemen and Sudan have also seen unrest.

Just four weeks to the day since the death of Mohammed Bouazizi, the Tunisian who set himself on fire to protest at oppression and corruption, the wave of anger he set in motion has gathered strength across the region. Some liken it to the fall of communism in eastern Europe in 1989.

Just a week ago, few Arabs could conceive of the Egyptians, better known for good humour and forebearance than for political energy, rising up to unseat a man who has ruled unchallenged for 30 years. Last week, Mubarak seemed certain of a sixth term, or of handing over to his son.

Unrest is stirring in other Arab countries like Jordan and Yemen, sending oil prices higher on fears of trouble in Saudi Arabia and on Egypt's Suez Canal. Mubarak's vision of a smooth handover of power helped calm such worries on markets.

Continued turmoil in Tunisia, however, is a reminder that political change is unlikely to be smooth anywhere.


ISLAMISTS
Effigies of Mubarak were hung from traffic lights. The crowds included men, women and children from all walks of life, showing the breadth of opposition to Mubarak.
The demonstration was an emphatic rejection of Mubarak's appointment of a new vice president, Omar Suleiman, a cabinet reshuffle and an offer to open a dialogue with the opposition.

The United States and other Western allies were caught out by the uprising. Washington has called for reforms and free elections but is also concerned that Islamists could gain a slice of power should Mubarak be forced out.

The prospect of a hostile neighbour on Israel's western border also worries Israeli Prime Minister Benjamin Netanyahu.

Kamran Bokhari at political risk consultancy Stratfor said even Mubarak's concession to step aside in due course was "huge": "It will send shockwaves across the region. It's not that I would necessarily say there's going to be a domino effect, but I think we will see an increase in protest and governments will certainly be worried.It is a tectonic shift.
"I don't think it will be enough for the protesters ... Then the most likely scenario would be the military would have to force Mubarak out ... Then you would have elections. It's quite possible the Muslim Brotherhood would perform well, but the military will also want to have a role."

At least 140 people have died since demonstrations began last Tuesday. Al Arabiya said the interior minister sacked last week was going to be prosecuted by the military.
(Additional reporting by Andrew Hammond, Patrick Werr, Dina Zayed, Marwa Awad, Shaimaa Fayed, Alexander Dziadosz, Yasmine Saleh, and Alison Williams in Cairo and William MacLean, Peter Apps and Angus MacSwan in London, Matt Spetalnick in Washington, writing by Alastair Macdonald, editing by Ralph Boulton)