CAIRO - Egypt announced plans to develop a region bordering Israel on Monday after Israeli officials blamed its loosening grip on the area for the killing of eight Israelis by armed militants, inflaming tensions between the two neighbours. Five Egyptian security personnel died when Israeli troops repelled the gunmen following the attack near Israel's Red Sea resort of Eilat on Thursday. Egypt said Israel's actions breached their 1979 peace treaty. Israel said the gunmen had entered the country by crossing from Gaza and through the Egyptian Sinai. Cairo has struggled to assert its grip on the isolated desert peninsula, especially after the overthrow of President Hosni Mubarak in February left a power vacuum that was quickly exploited by a local population resentful of the government in Cairo. Israel expressed its regret for the Egyptian deaths and said it was investigating the incident, but pressure was growing in Egypt for sterner sanctions. A group of politicians including former Arab League head Amr Moussa and other candidates for Egypt's presidency called for the return of the Egyptian ambassador in Israel, more troops in Sinai and trials for Israelis responsible for the killings. "Egypt after the January revolution is not like Egypt before. The corrupt, oppressive and compliant regime is gone for good," they said in a statement published in newspapers. They described Mubarak's government as "a strategic asset to Israel". "It has been replaced by a strong popular will that does not know weakness or complicity and understands well how to achieve retribution for the blood of the martyrs". Hundreds protested angrily outside the Israeli embassy in Cairo at the weekend. A protest of any size near the Israeli embassy would have been quickly smothered by state security forces in the Mubarak era. The spat has highlighted the dilemma faced by the generals ruling Egypt, caught between pressure to preserve the 1979 peace treaty with Israel and popular hostility to the Jewish state. The army is trying to keep a lid on social tension as Egypt prepares for elections later in the year as part of a promised transition to democratic civilian rule after Mubarak's removal. The top army officers now in charge in Cairo have broken with Mubarak's softly-softly approach and Egypt's condemnation of Israel included a demand for a change in relations between the two U.S. allies. But there were signs over the weekend that Egypt and Israel were both trying to ease the gravest crisis in their relations since Mubarak's overthrow. On Sunday evening Egypt's state media reported that Israeli President Shimon Peres had expressed his regrets over the Egyptian deaths in a phone call with the Egyptian ambassador to Tel Aviv, Yasser Reda. Peres held a Ramadan dinner earlier on Sunday for senior Arab officials at his home in Jerusalem where he told Egyptian diplomat Mustafa al-Kuni, that he has great respect for the Egyptian people, according to Israeli Ynet news website. The Egyptian state news agency said Peres had apologised to the Egyptian ambassador but that was not confirmed by Israel. It was not clear whether Egypt had followed through on its decision to withdraw its ambassador from Israel. The Palestinian Maan News said on Monday that the head of Egypt's military council Mohamed Hussein Tantawi had overruled a cabinet decision to recall Egypt's ambassador to Israel.
