By Li Hongmei

U.S. Secretary of State John F. Kerry released $250 million in badly needed economic assistance for Egypt on Sunday, telling the country's divided political classes that they must make economic and political reforms to qualify for additional U.S. support.

"The United States can and wants to do more," Kerry said in a statement released to reporters shortly after his more than two-hour session with Egyptian President Mohamed Morsi. About an hour of their time was spent one -on- one, in what U.S. officials said would be blunt discussions of Egypt's tanking economy and political deadlock.

A day after warning politicians that they must overcome differences to get Egypt's economy back on track and maintain its leadership role in the Middle East, John Kerry conveyed a similar message to President Mohammed Morsi.

After meeting with President Morsi, Kerry releases $250M in aid to Egypt
 
On two-day trip, Kerry wants Egypt to make politically difficult economic reforms crucial to securing loans, outside investment.

"When Egypt takes the difficult steps to strengthen its economy and build political unity and justice, we will work with our Congress at home on additional support," Kerry said. "These steps will also unlock much needed private-sector investment and broader financial assistance."

The State Department said Kerry's meeting with the Islamist leader also covered the crisis in Syria and prospects for Israeli-Palestinian peace. The chaotic domestic situation in Egypt has overtaken the traditional American agenda with Egypt, long its most-valued Arab ally and the linchpin of Arab-Israeli peace.

International investment and the revival of tourism, long the mainstay of the Egyptian economy, depend on a truce between Morsi's Muslim Brotherhood and secular moderates, and a reduction in street violence that has scared off foreigners.

The visit, part of Kerry's first overseas trip as secretary of state, also was the first by a top American diplomat since Egypt approved a new constitution that is at the heart of the current protests and political deadlock. Morsi's political opponents object both to the Islamic focus of the document and to what they call a ramrod approach to its passage.

Morsi's Freedom and Justice Party called Kerry's visit a good-faith effort to ease the political impasse between the ruling Islamists and the secular opposition.

Kerry's statement noted that during his two-day visit, he had met with political leaders, business leaders and representatives of non-governmental organizations, who "shared their deep concern about the political course of their country, the need to strengthen human rights protections, justice and the rule of law, and their fundamental anxiety about the economic future of Egypt."

Kerry said he discussed those same issues with Morsi "in a very candid and constructive manner" and that the two talked about the need to ensure that Egypt's upcoming parliamentary elections are "free, fair and transparent."

Amid questioning from Congress about Egypt's political instability and the U.S. budget crunch, some $450 million in U.S. aid to Egypt has been frozen on Capitol Hill. . In addition, the International Monetary Fund has held off on loans and debt relief worth more than $4 billion.

Kerry's announcement of aid includes $190 million from the frozen $450 million, following discussions with congressional Republicans who have objected to several of Morsi's policy moves and past statements offensive to Jews. The remaining $260 million from that pot could be freed if Morsi follows through on promised reforms, a U.S. official said on condition of anonymity to describe the sensitive diplomacy.

Separately, Kerry pledged $60 million for a program to boost economic development. That could increase to $300 million in coming years, Kerry said.