Mubarak strives to hold back Islamist tide: The threat from Muslim extremists has damaged Egypt's vital tourist trade. But Cairo has been slow to recognise a challenge to the whole of society, writes Charles Richards

THREE WEEKS after Egypt cracked down on Islamist extremists, arresting hundreds of militants, tour operators are still hoping that their devastated industry will pick up in the new year.

President Hosni Mubarak is confident the Islamist threat has been licked. Terrorism would not be allowed to undermine national security, he said shortly after the crackdown. Security forces had crushed the extremists who invoked the name of Islam for their terrorist acts, he declared. 'We are in full control, and have nothing to fear,' he said.

Thus did the President reduce the Islamist threat to one of law and order, not an inherent social phenomenon. Furthermore, he repeated the assertion - without producing a shred of evidence - that outside powers had been supporting what he called the terrorists.

His remarks followed the sweep by security forces on 8 December through the teeming slums of Imbaba in northern Cairo. Two factors prompted the crackdown: reports in the foreign press that a state within a state had been created in what they cheekily called the Islamic Republic of Imbaba; and the slump in tourism caused by earlier violence against tourists in Upper Egypt and an act of God, the October earthquake.

The damage to the tourist trade was especially serious. Tourism is the country's biggest foreign-exchange earner, bringing in pounds 1.9bn- pounds 2.6bn a year, twice as much as the Suez Canal. It is also highly labour intensive, employing one in fifteen of the workforce. In Luxor, hotel staff and travel agents report business 30 to 50 per cent down on last year.

Yet if the dangers to the physical safety of tourists have been exaggerated, the challenge posed to Egyptian society by the Islamist current is not. Egypt has changed radically over the past 10 years. Egyptians are fundamentally pious. But piety, primarily a personal observance, has been transformed into more outwardly displayed religiosity.

It is not merely the increased number of bearded men and veiled women in the streets; it is the encroachment on personal freedoms. One bank chairman reports that his pay clerk regularly deducts a few pence when handing out salaries at the end of the month 'for mosque building'. No one dares object. It is hard to ask a driver to turn down the car radio when it is broadcasting the Koran, an increasingly frequent occurrence.

The Islamist current can be divided into three main streams. The broad mass are increasingly observant Muslims seduced by the facile slogan: 'Islam is the solution.' Many are drawn by its social welfare programmes. A tenth of their number are militant activists, often in the politically tolerated Muslim Brothers. The hardcore are a minority in one or more splinter groups, such as those who assassinated President Anwar Sadat in 1981 and who seek violent confrontation with the government.

In Imbaba, the Islamists enforced the law, in the absence of the state, sorting out problems ordinarily the province of the authorities. They also imposed their view of Islamic law. Traditional dancing at weddings was banned. Video shops were threatened. Drunks were punished.

On a social level, the Islamic groups provide services that the state fails to give. This became especially clear after the earthquake when Islamist volunteers and charitable associations rushed in with blankets and food, while the government wrung its hands.

The Islamists have also for the past 10 years set the terms of the political debate, forcing the government on to the defensive. And they have gained control of the last liberal bastion, the lawyers' association.

What has changed, too, is the type of person drawn to the Islamist current. In the past the militants who belonged to more or less extreme groups were young zealots often with good university degrees but who were frustrated in their advancement by the system. An earlier generation would have sought salvation through the army.

The country's single most pressing problem can be reduced to one word: population. It is growing by more than 1 million a year. Some 500,000 come on to the job market each year. The government cannot provide for them. And increasingly those arrested in security sweeps are not the idealistic graduates of before, but despairing unemployed labourers.

No one should underestimate President Mubarak's personal commitment to eradicating Islamist extremism in Egypt. He was sitting next to his predecessor, Anwar Sadat, on 6 October 1981 when extremists fired their deadly bullets.

The government has sought to divide the hardcore extremists from the more general moderate trend. Yet the government's inertia and inefficiency in confronting the issue earlier has been criticised by the liberal Islamic thinker Hussein Ahmed Amin. 'At first Mubarak tried reconciliation. He made concessions all the time, increasing the percentage of newspaper pages on religious subjects, and forming a committee to study the application of Islamic sharia law. These conciliatory measures made the Islamists feel stronger. They demanded more concessions than he was ready to offer.

'The whole policy of propagating a so-called moderate brand of Islam is actually, with the continuing social and economic problems, enticing people to jump from moderate to extreme Islam when they face such problems as unemployment, lack of housing, or inability to get married,' says Mr Amin.