Bush issued an apology for the shooting and pledged compensation. Still,
the Egyptian parliament has been debating issuing an extradition request for
the U.S. contractor.
"Even if the bilateral relationship improves, Washington faces an uphill
battle on certain key issues, especially with regard to politically
empowering non-Islamist reformist elements, who have been even more harshly
repressed than the Islamists," the report, titled "Electoral and Social
Tensions Spike in Egypt," said.
The report said the 80-year-old Mubarak, in power since 1981, was also
expected to retire imminently. Mubarak's son, Gamal, was expected to
succeed.
"Taken together, these developments raise the specter of instability for
a key U.S. ally," the report said.
The Mubarak regime has been besieged by unprecedented labor unrest as
well as a bread shortage. In March, nearly a dozen Egyptians were killed in
fights while waiting for hours to buy subsidized bread. During a clash with
striking workers at a textile plant in Mahalla Al Kubra, Egyptian police
used live ammunition and rubber bullets, the report said.
"After decades of repression -- and thousands of years of continuous
dictatorship -- most Egyptians tend to be politically apathetic, a fact that
has led many in Washington to take the perennial stability of this strategic
and diplomatic ally for granted," Schenker said. "With a political
transition on the horizon, however, the problems in Egypt suggest that
Washington has more reason for concern than optimism."