Vatican bank money laundering risk: probe

Italian investigators say the Vatican bank operated in a way that facilitated money laundering. Source: AAP

ITALIAN investigators have said the Vatican bank operated in a way that facilitated money laundering, according to leaked papers quoted by two Italian newspapers on Saturday after a three-year inquiry.

The bank, officially known as the Institute for Works of Religion (IOR in Italian) did not carry out enough checks on its clients, and account holders were allowed to transfer large sums on behalf of others.

"There is a high risk that the way the IOR operates, without specifying its real clients, it can be used as a screen to hide illegal operations," prosecutors wrote in a document that was quoted by Corriere della Sera.

They also faulted Italian banks that accepted transfers from the IOR for failing to probe the origin of the money, which is then moved into other banks.

"The IOR can easily become a channel for the laundering of money with a criminal origin, they said.

They also contradicted IOR statements that its account holders are all religious congregations or clergy.

"There are also private individuals who, because they enjoy a particular relationship with the Holy See, can deposit money and open accounts," they said.

The investigation centred on a 23 million euro ($A32.73 million) transfer made from the Vatican bank to Italian lender Credito Artigiano in September 2010.

Three million euros were then sent on to Banca del Fucino and 20 million to JP Morgan Frankfurt.

The transfer was signed off by IOR's then director general Paolo Cipriani and his deputy Massimo Tulli, who both resigned last week.

Prosecutors are set to file charges against them.

La Repubblica said the two were also being accused over a dozen other smaller transfers to JP Morgan.

Pope Francis has set up a committee to investigate the bank and is said to be planning a major shake-up of the scandal-ridden institution as part of broader reforms of the Vatican bureaucracy.

The Vatican is reforming its finances in order to be included on a "white list" of states that respect international rules against money laundering.

Italian police last month arrested a senior cleric on suspicion of money laundering and fraud for allegedly plotting to smuggle millions of euros into Italy.

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Snowden's hopes rise on asylum offer

Venezuelan President Nicolas Maduro has offered asylum to US intelligence leaker Edward Snowden. Source: AAP

US intelligence leaker Edward Snowden remained stranded in a Moscow airport for the 14th day amid rising hopes he may finally be able to leave Russia after being offered asylum by Venezuela.

The saga surrounding the fugitive former US National Security Agency (NSA) contractor took a new turn late on Friday when Venezuela's leftist President Nicolas Maduro offered to grant him "humanitarian asylum".

Nicaraguan President Daniel Ortega had only moments earlier also said his Latin American country could offer a safe haven for one of Washington's most wanted men "if circumstances permit".

Snowden, 30, had earlier been denied asylum by many of the 21 countries to which he had applied last week.

The WikiLeaks anti-secrecy website, which has been supporting Snowden's cause, said he had recently applied to six additional countries it refused to name.

But it was far from clear how exactly Snowden could reach another nation from the transit zone of Russia's sprawling Sheremetyevo international airport.

He has been stripped of his passport by the US authorities and a refugee pass initially believed to have been offered to him by Ecuador has since been declared invalid.

Snowden could only take flights from Sheremetyevo and not another Moscow airport to which visiting foreign dignitaries such as Maduro have access because he cannot move beyond Russian passport control.

Maduro made his intentions clear in an address at an independence day event in Caracas.

"As head of state of the Bolivarian republic of Venezuela, I have decided to offer humanitarian asylum to the young Snowden ... to protect this young man from the persecution launched by the most powerful empire in the world," Maduro said.

Nicaragua's Daniel Ortega voiced a slightly more toned down message only minutes earlier.

"We are open, respectful of the right to asylum, and it is clear that if circumstances permit it, we would receive Snowden with pleasure and give him asylum here in Nicaragua," Ortega said at a public event.

Ecuador had been seen as the American's best hope when he arrived in Moscow from Hong Kong on June 23 after leaking secrets about the extent of the US data surveillance programme to the press.

But the leftist government in Quito has yet to consider his application.

Russian President Vladimir Putin has refused to extradite Snowden to the US while still stressing that he would like to see him gone as soon as possible.

"Russia is not happy that he is here. If it wanted to offer him asylum, this would have been done right away," said Carnegie Moscow Centre analyst Maria Lipman.

She noted that Putin himself was a former KGB spy who cares deeply about the safety of state secrets.

"Putin does not want to help someone who reveals secrets - Putin is very serious about this," said Lipman.

"He would like to get rid of Snowden, but this is getting more and more difficult," the analyst said.

Putin has denied ever questioning Snowden about the details of the US spy network and has even suggested that doing so was not worth the effort.

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'World's biggest cocaine dealer' deported

COLOMBIAN police have arrested an alleged boss of Italy's Calabrian mafia, who is considered the most wanted drug trafficker in Europe, the defence ministry said.

Roberto Pannunzi, who is wanted in Italy on drug trafficking charges, was detained in a Bogota shopping centre with the help of the US Drug Enforcement Administration (DEA), the ministry said in a statement.

"When he was captured, Pannunzi identified himself with a fake Venezuelan identification card bearing the name Silvano Martino," it said.

The statement said Pannunzi is the "chief of the 'Ndrangheta criminal organisation."

In April, Colombia captured another suspected top Italian mafia member, Domenico Trimboli, alleged to be a lynchpin between the Medellin drug cartel and the 'Ndrangheta, which is based in the Calabria region in southern Italy.

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Search called off for American schooner

THE search has been called off for the American schooner Nina which went missing with seven people on board in the Tasman Sea.

The 21m sailing vessel was travelling from Opua in the Bay of Islands to Newcastle in Australia on May 29 with six Americans and one British man aboard.

It struck winds up to 110km/h and 8m swells and has not been heard from since June 4.

Extensive searching over the past 11 days of an area more than eight times the size of New Zealand has failed to find any trace of the schooner.

No more searching is planned unless new information comes to light, Rescue Co-ordination Centre New Zealand operations manager John Seward said on Friday.

But radio broadcasts will continue to be made in New Zealand and Australia in the search for new information, he said.

Those on the Nina are David Dyche III, 58, and wife, Rosemary, 60, their son David Dyche IV, 17, friend Evi Nemeth, 73, Kyle Jackson, 27, Danielle Wright, 18, and Briton Matthew Wootton, 35.

The vessel is equipped with a satellite phone, a tracking device and an emergency beacon that has not been activated.

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NZ government signs SkyCity deal

THE New Zealand government and SkyCity have signed a deal over the construction of a convention centre in Auckland.

The casino will fully fund the $NZ402 million ($A348 million) centre in exchange for gambling concessions.

The contract was signed on Friday, a spokesman for NZ Economic Development Minister Steven Joyce has confirmed to NZ Newswire.

The details of the deal will be released on Saturday morning, he said.

The negotiations were originally supposed to be completed by June 14, but were pushed out to June 30, then July 5 after the sides failed to reach an agreement.

A commitment to complete the deal for the New Zealand International Convention Centre was unveiled on May 13.

It was announced then that the convention centre would cater for up to 3500 international conference delegates at any one time, with construction expected to begin next year and opening for business in 2017.

SkyCity would operate the convention centre for at least 35 years, and fund its construction, fit-out and land costs, in exchange for:

* extending SkyCity's Auckland casino licence, which is due to expire in 2021, out to 2048, and an amendment to cover all of SkyCity's properties in Federal Street

* 230 more pokie machines on the casino floor

* 40 more gaming tables

* a further 12 gaming tables that can be substituted for automated table game player stations, but not pokie machines

* up to 17 per cent of its pokie machines and automatic table games will be able to accept banknotes of greater than $20

* cashless gaming technology on all pokie machines and automatic table games at its Auckland casino.

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Popes have no faith in gay marriage

THE Vatican has issued an unprecedented religious text co-written by Pope Francis and his predecessor Benedict XVI in which the two popes said faith should serve the "common good" but restated their opposition to gay marriage.

Francis paid tribute to pope emeritus Benedict XVI in the encyclical, saying that the ex-pontiff had "almost completed" the text before stepping down in a historic resignation this year and that he himself had merely added "further contributions."

The 82-page text stresses that there is no contradiction between the Catholic faith and the modern world and calls for more dialogue with scientists, other religions and non-believers.

It also restates the Catholic Church's position on marriage saying it should be a "stable union of man and woman."

"This union is born of their love, as a sign and presence of God's own love, and of the acknowledgment and acceptance of the goodness of sexual differentiation," reads the text.

While some passages in the encyclical have a more academic and ponderous feel characteristic of Benedict XVI, others contain the simpler expressions and brighter outlook of his successor.

Examples of Francis's input could be references to the need to protect nature and to sustainable development, as well as his oft-repeated phrase: "Let us refuse to be robbed of hope".

Gerhard Ludwig Mueller, head of the Vatican's Congregation for the Doctrine of the Faith, noted there were "differences of style, sensibility and accent" between the two popes in the text but said there was "substantial continuity of the message".

Francis and Benedict, who both live within the walls of the Vatican City and wear the white papal vestments, met publicly on Friday at a ceremony in the Vatican for the unveiling of a new statue.

Benedict became the first pope to resign of his own free will in 700 years in February and Francis was elected to succeed him in March as the first non-European pope in nearly 1,300 years.

The central message of the encyclical, entitled Lumen Fidei (Light of Faith) is that faith should be considered a "common good".

"Its light does not simply brighten the interior of the Church, nor does it serve solely to build an eternal city in the hereafter, it helps us build our societies," it says.

The text also calls for a "return to the true basis of brotherhood", saying that the ideal of equality without faith "cannot endure".

In another passage the encyclical says that believers should be humble and not "presumptuous".

"As a truth of love, it is not one that can be imposed by force... Faith is not intransigent, but grows in respectful coexistence with others."

Encyclicals are papal circular letters addressed to the clergy of the Roman Catholic Church that are intended to summarise a pontiff's thoughts on a particular aspect of Church life.

Some of them have gone down in history as significant landmarks in Church history.

Pope Leo XII in 1891 published Rerum Novarum in which he undertook to engage the Catholic Church in social issues, denouncing living conditions for the working class and encouraging workers to organise themselves into associations.

In 1914, Benedict XV denounced the horrors of World War I in Ad beatissimi apostolorum principis and Pius XI in Mit brennender Sorge in 1937 condemned Nazi racism.

In Paul VI's Humanae Vitae in 1968, Paul VI condemned all forms of contraception, while John Paul II in Evangelium Vitae in 1995 called for opposition to laws legalising abortion and euthanasia.

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New home sales continue recovery

Sales of new homes rose 1.6 per cent in May, new industry figures show. Source: AAP

SALES of new homes are continuing their rise from the lows experienced in 2012.

New home sales rose for the fourth month in a row, with a 1.6 per cent improvement in May, taking monthly sales to their highest level in a year and a half, the Housing Industry Association (HIA) said on Wednesday.

HIA chief economist Harley Dale said there was solid evidence of modest growth in new residential construction and that was expected to continue into the new financial year.

"That outcome was important, following as it did a sustained period of weakness which saw activity in a majority of markets reach, historically, very low levels," he said.

"The key is whether a new home building recovery can be sustained, and at a growth rate sufficient to meaningfully assist the Australian economy with its rebalancing acts."

As mining and resource investment falls it's hoped other parts of the economy will pick up pace - rebalancing the economy.

Dr Dale said government help in increasing the supply of new housing was needed to help the Australian economy make the transition.

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S&P cuts Barclays, Credit Suisse, Deutsche

Standard & Poor's has cut the credit ratings for Barclays Bank, Credit Suisse and Deutsche Bank. Source: AAP

RATINGS agency Standard & Poor's has lowered the long-term counterparty credit ratings of Barclays Bank Plc, Credit Suisse AG and Deutsche Bank AG to "A" from "A-plus".

The agency on Tuesday kept its "A/A-1" long and short-term ratings on Switzerland's UBS AG.

All remain at investment grade, and S&P said the outlooks on all four are stable.

"We see increasing risks for some large Europe-based banks operating in investment banking, as regulators and uncertain market conditions make operating in the industry more difficult," S&P said.

In particular, these banks' debtholders face higher credit risks because of tighter regulation, fragile global markets, stagnant European economies, and rising risk of financial crisis-related lawsuits.

S&P said Barclays, Credit Suisse, Deutsche Bank, and UBS are "among the most exposed in Europe" to global regulatory changes.

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Rudd reckons Abbott lacks 'ticker'

PRIME Minister Kevin Rudd suspects Tony Abbott lacks the "ticker" to debate him on key policy areas.

Mr Abbott has been "lying" to the Australian people about the state of the economy, his ability to turn back asylum seeker boats and the impact of carbon pricing, Mr Rudd says in his first major television interview since retaking the leadership from Julia Gillard.

"So what I would say to Mr Abbott - you've been doing this for a long time, it's time we had a properly moderated debate ... on his chosen subjects," Mr Rudd said on the ABC's 730 program.

"Mr Abbott, I think it is time you demonstrated to the country you have a bit of ticker on this.

"He's the boxing blue. I'm the glasses-wearing kid in the library.

"Come on, let's have the Australian people form a view about whether his policies actually have substance, whether they actually work, or whether they are just slogans."

On his now-broken pledge never to return to the Labor leadership, Mr Rudd said Ms Gillard had vacated the spot and brought on the caucus ballot.

He said a second reason was the prospect of defeat at the 2013 election.

"The Australian Labor Party and the government was on track towards a catastrophic defeat and I wasn't about to stand idly by and see everything we worked for for the last five or six years go down the gurgler as Mr Abbott set about ripping it apart."

He said he was not motivated by revenge, but taking up the fight to Mr Abbott and coming up with a positive plan for the future.

Mr Rudd said he was working through policy changes but it would be an "orderly process".

He said he wanted to take the time to "think and take the best advice".

Asked whether Labor would be punished for its long leadership turmoil, Mr Rudd said he had faced four Liberal leaders over a period of four years after he took on the Labor leadership.

"In political parties these things happen from time to time," he said.

A spokesman for Mr Abbott told AAP the opposition leader would debate Mr Rudd once the prime minister "ends the uncertainty and names the election date".

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Road tolls would reduce traffic: report

TOLLS and congestion fees may be the answer to reducing traffic and improving the state of Australian roads.

An Infrastructure Australia (IA) report, released on Tuesday, argues there is reduced accountability for governments to provide quality infrastructure under the current taxpayer system.

"To get the infrastructure we want, when we want it, we need to pay more as users," the report said.

It says congestion pricing in London has reduced traffic by 21 per cent, increased average travel speeds by 37 per cent and reduced road emissions.

Revenue raised by the fee is invested back into public transport, contributing to increased bus and passenger rail patronage.

IA also called for a single national fund to be established to roll over the many different infrastructure investment sources.

The fund would account for over $100 billion for projects such as the National Broadband Network and clean energy funding.

AI says the current funding model has overlapping purposes, different assessment frameworks and different decision making mandates.

Australia's future economic performance would largely depend on how its major cities are planned, the report says.

This will be particularly important considering each of Australia's five biggest capital cities will nearly double their population by 2056.

Denser cities was the answer to more productive living, it said.

The closer businesses are to each other and to a deep pool of skilled labour, the report argued, the higher their productivity.

For individuals, this proximity also means lower costs when looking for a job.

The Australian Industry Group welcomed the report's findings.

"The time is right to make reforms that will facilitate greater and more astute investment, including from the private sector, and encourage efficient use of infrastructure," the group's chief Innes Willox said.

The Urban Development Institute of Australia said addressing Australia's infrastructure problems must be a key priority for the next federal government.

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Patents keep HIV drugs too pricy

DOCTORS Without Borders is warning that rising intellectual property rights are blocking the generic production of newer drugs to treat HIV and are keeping them out of reach of developing countries.

The medical aid group said at an international AIDS meeting here that prices of older drugs long used to treat patients have fallen sharply as India and other countries make generics. But newer drugs that are more effective against the AIDS virus are too expensive, costing up to 15 times more.

"It's good news that the price of key HIV drugs continues to fall as more generic companies compete for the market, but the newer medicines are still priced far too high," said Jennifer Cohn, medical director for Doctors Without Borders' access campaign.

"We need the newer treatments for people that have exhausted all other options, but patents keep them priced beyond reach."

Patients can be treated with a combination of three or four older drugs, but those who develop resistance to them need the expensive newer medicines.

According to Doctors Without Borders, the governments of Thailand and Jamaica pay $US4,760 ($A5,178.42) and $US6,570 ($A7,147.52), respectively, a year per patient for the new drug Darunavir alone.

Paraguay pays $7,782 for Etravirine, while Armenia pays $13,213 for Raltegravir. In comparison, a cocktail of older generic drugs costs as little as $139 per person a year.

Doctors Without Borders urged the United States and 11 other countries negotiating a Trans-Pacific Partnership not to sign the free-trade pact.

It warned that the pact will increase intellectual property rights across Asia and the Americas, expanding monopoly protection for medicines and threatening cheap access to drugs.

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Opposition does not support military coup

EGYPT'S main opposition coalition said it would not support a "military coup" and trusted that an army statement giving political leaders 48 hours to resolve the current crisis did not mean it would assume a political role.

"We do not support a military coup," the National Salvation Front (NSF) said in a statement.

"The NSF has been committed, since its formation on 22 November, 2012, to build a civil, modern and democratic state that allows the participation of all political trends, including political Islam. We trust the army's declaration, reflected in their statement (Monday), that they don't want to get involved in politics, or play a political role," it said.

Meanwhile US President Barack Obama is encouraging embattled Egyptian President Mohammed Morsi to respond to concerns being voiced by throngs of protesters seeking his removal from office.

The White House confirmed in a statement Tuesday that Obama called Morsi on Monday while travelling in Africa.

The statement said Obama told Morsi that the United States is committed to the democratic process in Egypt and does not support any single party or group. The statement also said Obama underscored to Morsi that the current crisis can only be resolved through a political process.

Obama also told Morsi he's particularly concerned about violence in the demonstrations, especially sexual assaults against women.

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Rights groups calls for borders to open

TURKEY, Jordan and Iraq must fully reopen their border crossings to allow thousands of Syrians fleeing their country's war to seek refuge, Human Rights Watch said on Monday.

"Iraqi, Jordanian, and Turkish border guards are pushing back tens of thousands of people trying to flee Syria," the international rights group said, adding that the lives of those trying to flee were in danger.

"Iraq, Jordan, and Turkey have either closed numerous border crossings entirely or allowed only limited numbers of Syrians to cross, leaving tens of thousands stranded."

The UN says more than 1.7 million Syrians have fled the conflict in their country. The vast majority have sought refuge in neighbouring countries.

But only Lebanon has kept an open-door policy for Syrian refugees, says HRW.

Syria's war broke out more than 27 months ago and has left more than 100,000 dead, the Syrian Observatory for Human Rights watchdog says.

New York-based HRW stressed international law prohibits countries "from sending anyone back to -- or pushing back anyone trying to leave -- a country where their life or freedom would be threatened".

HRW urged donor countries to step up support to countries hosting Syrian refugees.

But "neither the pressure those countries are under due to rising refugee numbers, nor giving aid inside Syria, can justify violating people's basic right to seek asylum from persecution and other abuse," HRW stressed.

It said Jordan denies closing its borders, though "recently arrived refugees... say that Jordanian border guards blocked their and others' entry for days or weeks in May".

Iraq's Kurdistan regional government has admitted closing the Syria border but has since mid-June allowed some Syrians in need of emergency assistance to cross over.

Baghdad has "severely limited the number of Syrians allowed to enter since August 2012, and new arrivals virtually ceased in late March," HRW said.

Turkey is "blocking the entry of thousands of Syrians at the Bab al-Salam, Atma, and other border crossings with Syria", it added.

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Man stabbed in head during Brisbane fight

A MAN has been stabbed in the head during a fight in central Brisbane.

The 27-year-old was taken from the scene of the fight on Mary Street to Royal Brisbane Hospital with non life-threatening injuries in the early hours of Monday, police say.

A 20-year-old man has been charged with two counts of assault occasioning bodily harm, acts intended to cause grievous bodily harm, wounding and two counts of threatening violence over the fight.

He was taken to Princess Alexandra Hospital with non life-threatening injuries and is due before the Brisbane Magistrates Court on Tuesday.

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EU probes banks on credit trading

THE European Commission says many of the world's largest investment banks appear to have colluded to block attempts by exchanges to trade and offer more transparent prices for financial products known as credit derivatives.

The commission, the executive arm of the European Union, said Monday it has informed 13 banks - including Citigroup, Goldman Sachs, JPMorgan and Morgan Stanley - as well as the industry association for derivatives and a data service provider, of its objections.

The objections detail what the groups are thought to have done. Sending these closes the first phase of an investigation that began in March.

Next the banks will have 30 days to respond.

Then the commission must make a decision on whether the companies violated antitrust rules before considering consequences, which could include fines.

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Pakistan backing Afghan peace efforts

British Prime Minister David Cameron has arrived in Pakistan for talks on the Afghan peace process. Source: AAP

PAKISTAN has assured visiting British Prime Minister David Cameron that it will promote efforts to reach a peace deal in neighbouring Afghanistan before NATO's planned withdrawal.

Cameron is the first foreign government leader to visit Islamabad since Prime Minister Nawaz Sharif took office in June after winning landmark elections in May.

Relations between Kabul and Islamabad are traditionally mired in distrust. The apparent headway made at a summit hosted by Cameron in February has since unravelled in a series of public rows.

Cameron flew to Pakistan from Afghanistan, where he joined an international push to revive peace efforts that recently collapsed in ignominy after the Taliban opened an office in the Qatari capital Doha.

"We hope that the UK will continue these efforts to seek sustainable peace and stability in Afghanistan," Sharif told reporters after Sunday's talks with Cameron.

He supported Afghan President Hamid Karzai's position that any peace process should be "Afghan-owned and Afghan-led".

"I have assured Prime Minister Cameron of our firm resolve to promote the shared objective of a peaceful and stable Afghanistan, to which the three million Afghan refugees currently living in Pakistan can return with honour and dignity," said Sharif.

Cameron welcomed Sharif's remarks about the "vital importance of the relationship between Pakistan and Afghanistan".

"I profoundly believe that a stable, prosperous, peaceful, democratic Afghanistan is in Pakistan's interest, just as a strong, stable, peaceful, prosperous, democratic Afghanistan is in Pakistan's interest, and I know that you and President Karzai will work together towards those ends," Cameron said.

The search for a peace deal is an urgent priority as 100,000 US-led NATO combat troops prepare to withdraw next year and Afghan forces take on the fight against insurgents that has lasted more than a decade.

The Taliban office in Qatar that opened on June 18 was meant to foster talks but instead enraged Karzai, who saw it as being styled as an embassy for a government-in-exile.

He broke off bilateral security talks with the Americans and threatened to boycott any peace process altogether.

On Saturday however, Karzai told Cameron that a subsequent Taliban attack on the presidential palace "will not deter us from seeking peace".

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EU alarmed over alleged US bugging

A top EU official says ties with the US could suffer over a report that America bugged EU offices. Source: AAP

A "SHOCKED" European Union is angrily awaiting explanations from Washington following allegations of US spying on EU offices, which could have a "severe impact" on relations.

Martin Schulz, the president of the European Parliament, said in a statement: "I am deeply worried and shocked about the allegations of US authorities spying on EU offices", both in Brussels and the United States.

"If the allegations prove to be true, it would be an extremely serious matter which will have a severe impact on EU-US relations."

Schulz demanded full and speedy clarification from the US authorities.

The German weekly Der Spiegel on Sunday published a report it claimed was based on confidential documents, some of which it had been able to consult via the fugitive US intelligence leaker Edward Snowden.

One document, dated September 2010 and classed as "strictly confidential", describes how the NSA kept tabs on the European Union's diplomatic mission in Washington, Der Spiegel said.

Microphones were installed in the building and the computer network infiltrated, giving the agency access to emails and internal documents.

The EU delegation at the United Nations was subject to similar surveillance, the newspaper said: the leaked documents referred to the Europeans as "targets".

The spying also extended to the 27-member bloc's Brussels headquarters.

Der Spiegel referred to an incident "more than five years ago" when EU security experts discovered telephone and online bugging devices at the Justus Lipsius building.

In 2003, the EU announced it had found phone taps in the building targeting the offices of several countries, including Britain, France and Germany. It was not immediately clear if Der Spiegel was referring to this case.

US spying was "out of control", said Luxembourg Foreign Minister Jean Asselborn.

"The US would do better to monitor its intelligence services instead of its allies," he added.

Even before the latest allegations, the EU's Justice Commissioner Viviane Reding wrote to US attorney general Eric Holder earlier this month calling for answers about its internet spy program.

"Fundamentally, this is a question of trust," Reding said in a June 14 speech. "Trust of citizens towards their governments and to the governments of partner nations."

The top-secret PRISM program collects and analyses information from internet and phone users around the world, with access to data from Google, Yahoo! and other internet firms.

US officials say the information gathered is vital in the fight against global terrorism.

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Crowds gather for anti-Morsi rallies

Egypt is bracing for mass protests as President Mohamed Morsi's opponents determine to oust him. Source: AAP

EGYPT is bracing for mass rallies with President Mohamed Morsi's opponents determined to oust him and his Islamist supporters vowing to defend his legitimacy, stoking fears of a violent first anniversary of his taking office.

Thousands of jubilant protesters gathered in Cairo's Tahrir Square ahead of Sunday's scheduled marches, waving Egyptian flags as patriotic songs boomed from speakers.

"The people want the ouster of the regime," the protesters chanted, the signature slogan of the 2011 revolt that ousted Hosni Mubarak and brought Morsi to power.

Some protesters held up red cards, others wore black headbands with 'Leave, Morsi!' written on them.

"This is the second revolution and Tahrir is the symbol of the revolution," said carpenter Ibrahim Hammouda, who travelled from the northern city of Damietta to join the protest.

Marchers were scheduled to set off at 5pm local time (0200 AEDT Monday) for the Ittihadiya presidential palace, close to a neighbourhood where thousands of Morsi supporters vowed to pursue a counter-demonstration in defence of the president.

Anti-Morsi demonstrations were also expected in provincial cities.

Police and troops have deployed to protect key buildings around the country, security officials said. The health ministry said hospitals have been placed on high alert.

A senior security official said the Suez Canal, the vital waterway that connects the Mediterranean with the Red Sea, has been placed under "maximum security."

The streets of Cairo were unusually quiet for the first day of the working week in Egypt, with banks and most offices closed.

The grassroots movement Tamarod - Arabic for rebellion - is behind a campaign that claims to have collected millions of signatures to a petition demanding Morsi's resignation and new elections.

The week leading up to the showdown has already seen eight people killed, including an American, and scores more injured as protesters from both sides took to the streets.

Morsi, previously a senior Muslim Brotherhood leader, is Egypt's first freely elected president, catapulted to power by the 2011 uprising that ended three decades of authoritarian rule by Mubarak.

His opponents accuse him of betraying the revolution by concentrating power in Islamist hands and of sending the economy into free fall.

But his supporters say that many of the challenges he faces he inherited from a corrupt regime, and that he should be allowed to serve out his term which ends in 2016.

Any attempt to remove him from office, they say, is a coup against democracy.

Leading opposition figure, Nobel peace laureate Mohamed ElBaradei, urged the president "to listen to the people" and step aside.

The fervent displays of emotion from both camps highlight the deep divisions in the Arab world's most populous country.

The army, which led a tumultuous transition after the revolt that ousted Mubarak, has warned it will intervene if there is major unrest.

Since taking office, Morsi has battled with the judiciary, the media and the police. The economy has taken a tumble, investment has dried up, inflation soared and the vital tourism industry has been battered.

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