Egyptian government to say mediation failed to end crisis By Maggie Fick and Shaimaa Fayed CAIRO (Reuters) - Egypt's army-installed government is expected to announce that foreign mediation designed to end the country's political crisis has failed, a state-run newspaper said on Tuesday. Al-Ahram newspaper, citing official sources, also said the government would declare that Muslim Brotherhood protests against the army's overthrow of President Mohamed Mursi were non-peaceful - a signal that it intends to end them by force. The report appeared hours after two senior U.S. senators delivered a strong message to the military, saying it should release political prisoners and start a national dialogue to return Egypt to democratic rule. The Republican senators - Lindsey Graham and John McCain - also described the removal of the Islamist Mursi as a coup - a definition the military and interim government have bridled at. Egypt has been in turmoil since Mursi's overthrow on July 3, following huge demonstrations against his rule. The country's first freely elected president, Mursi is now being detained at an undisclosed location and thousands of his supporters remain camped out at two protest sites in Cairo. Envoys from the United States, the European Union, Qatar and the United Arab Emirates have been pushing to resolve the crisis and avert further bloodshed between Mursi's backers and the security forces. But the al-Ahram report dashed hopes of a breakthrough and cast the blame on the Muslim Brotherhood's intransigence. It said the interim government would announce "the failure of all U.S., European, Qatari and UAE delegations in convincing the Brotherhood of a peaceful solution to the current crisis." The government had allowed the envoys to visit jailed Brotherhood leaders in order to give a peaceful solution a chance. But it now considered Mursi's overthrow a fait accompli and would proceed with its own "road map" for elections in nine months, al-Ahram said. The government announcement also set the stage for a showdown with pro-Mursi protesters camped out at Rabaa and al-Nahda in Cairo, saying they were non-peaceful gatherings. The security forces last week promised the protesters safe exit if they quit the camps, but warned their patience was limited. They may, however, hold off any action until after Sunday, the end of Eid al-Fitr, the holiday that marks the close of the Muslim fasting month of Ramadan. The latest development put the brakes on a mission by Graham and McCain, sent to Cairo by U.S. President Barack Obama to help resolve the crisis in a country that is instrumental in Washington's Middle East policy. The two men urged the government to free political prisoners and start a dialogue with the Brotherhood. They also appealed to the Brotherhood, many of whose leaders have been jailed, including the deposed president, to avoid resorting to violence and to join the dialogue. The people who are in charge were not elected. The people who were elected are in jail. The status quo is not acceptable," Graham told a news conference. They also described Mursi's overthrow as a coup - a definition that is hotly disputed by the rival Egyptian sides and among U.S. officials, and could trigger a cut-off of the $1.3 billion U.S. military aid Egypt receives each year. However, "cutting off aid would be the wrong signal at the wrong time," McCain said. Their comments after meeting army chief General Abdel Fattah al-Sisi, interim Vice President Mohamed ElBaradei and interim Prime Minister Hazem el-Beblawi, appeared to have riled the military and government. A spokesman for the interim government, Sherief Shawki, gave a cool response to the senators' words. He rejected their characterization of Mursi's overthrow as a coup and said the army acted in response to the demands of the Egyptian people. The government would stick by that plan, he said. He also rejected the call to release jailed Brotherhood members, saying they would be dealt with by the courts. Mursi took power in June 2012, 16 months after the overthrow of U.S.-backed strongman Hosni Mubarak, who had ruled for nearly 30 years. But fears he was trying to establish an Islamist autocracy, coupled with a failure to ease economic hardships afflicting most of Egypt's 84 million people, led to mass street demonstrations, triggering the army move. Almost 300 people have been killed in political violence since the overthrow, including 80 shot dead by security forces on July 27. The crisis has put U.S. policy in a quandary. Mubarak was a close ally who kept Islamist militants under heel and maintained peace with Israel. Washington was slow to support the popular uprising that ousted him and cautiously welcomed Mursi's election. McCain said the senators also met members of Mursi's Freedom and Justice Party, the political arm of the Muslim Brotherhood. On Monday, U.S. Deputy Secretary of State William Burns and European Union envoy Bernardino Leon met jailed Brotherhood deputy leader Khairat El-Shater in the prison where he is being held. They tried to persuade him to recognize that there was no realistic prospect of Mursi being reinstated and to accept a political compromise. A Brotherhood spokesman said Shater had insisted they should be talking to Mursi and the only solution was the "reversal of the coup." Writing by Angus MacSwan in Cairo; Editing by Stacey Joyce