UPDATE 4-Mursi blasts "enemies", two dead in Egypt
* Clashes in Nile Delta city leave 2 dead, 90 injured
* Mursi seeks to defuse calls for his removal
* Many fear weekend protests will lead to clashes
* Army warns it will step in if violence escalates
(Updates with Mursi speaking)
CAIRO, June 26 (Reuters) - President Mohamed Mursi blamed "enemies of Egypt" for paralysing its new democracy in a speech on Wednesday that criticised street protests ahead of mass rallies against Islamist rule this weekend.
It was a televised address that admitted errors and offered reform but was otherwise uncompromising in its denunciation of those he blamed - some of them by name. Earlier, two people were killed and scores wounded in the latest factional street clashes that many fear may presage a violent showdown this weekend.
After an hour, he had offered nothing that would persuade his opponents to call off mass demonstrations they have called to demand Mursi's resignation and new elections. The army has warned it may step in if politicians do not reconcile.
Interrupted by occasional cheers from Islamist supporters, Mursi told an audience that also included generals and officials that many of the difficulties of his first year in office were due to the continued influence of corrupt figures who had been appointed before the 2011 revolution by Hosni Mubarak.
"I took responsibility for a country mired in corruption and was faced with a war to make me fail," he said, naming some senior officials, including the man he beat in last year's presidential run-off, as well as neighbourhood "thugs".
Mursi acknowledged the hardships many of the young who saw hope in the revolution have had in an economy mired in crisis and offered them reforms and, in time, a higher minimum wage.
"Political polarisation and conflict has reached a stage that threatens our nascent democratic experience and threatens to put the whole nation in a state of paralysis and chaos," he said. "The enemies of Egypt have not spared effort in trying to sabotage the democratic experience."
"I stand before you as an Egyptian citizen, not as the holder of an office, who is fearful for his country," he said before saying he would review his first year in office, which began on June 30 - the date protesters have chosen to rally.
"Today, I president an audit of my first year, with full transparency, along with a road map. Some things were achieved and others not," Mursi said, without elaborating.
"I have made mistakes on a number of issues."
Hours before he spoke, two people were killed and more than 200 were treated for injuries in the city of Mansoura, north of Cairo, when Islamist supporters clashed with their opponents - the latest street fighting over the past few days that many fear may presage a massive showdown in the streets this weekend.
Witnesses heard gunfire and state television showed a man in hospital with birdshot wounds.
The army has warned politicians it could effectively take charge again if they fail to find consensus. Some in the anti-Mursi camp might welcome that, but Islamists say they would fight any "coup" against Egypt's first freely elected leader.
Fears of a violent stand-off in the streets between Mursi's Islamist supporters and a broad coalition of the disaffected have led people to stock up on food. Long lines of cars outside fuel stations have snarled roads in Cairo and other cities.
Some observers fear Egypt may be about to erupt again, two years after the revolution that toppled Mubarak. Politics are polarised between Mursi's disciplined Muslim Brotherhood and disparate opponents who have lost a series of elections.
The deadlock has contributed to a deepening economic crisis and the government is running out of cash.
Liberal critics worry about Islamist rule - a coalition of local human rights groups accused Mursi's Muslim Brotherhood on Wednesday of crimes rivalling Mubarak's and of setting up a "religious, totalitarian state". But many Egyptians are simply frustrated by falling living standards and fear chaos.
The army is held in high regard by Egyptians, especially since it pushed aside Mubarak following the 2011 uprising. Its chief issued a warning on Sunday, urging compromise while also defending the legitimacy of Mursi's election.
One senior Western diplomat in Cairo said the army might try to impose a solution, especially if the political deadlock turns violent: "The margin for a political solution is definitely very narrow," he said. "If (violence) crosses a certain threshold, the role of the army might become by default more proactive."
Islamists, oppressed for decades, fear a return of military rule and hardliners warn of a fight if the generals intervene. They accuse Mubarak-era institutions, including courts, state media, police and civil service, of working to undermine Mursi.
An officer in one of Egypt's internal security agencies told Reuters this week that the country needed to be "cleansed" of the Islamists who he described as terrorists.
The army, still heavily funded by Washington as it was under Mubarak, and Western governments have been urging Mursi to bridge differences with his non-Islamist opponents. He says he has tried. They say he and his Muslim Brotherhood, along with harder line allies, are trying to monopolise the state.
At the International Crisis Group, Egypt analyst Yasser El-Shimy said he still doubted the army wanted, or would try, to take control and was more likely to push parties to compromise.
"What is going to be a game changer," he said, "is whether the violence is so massive or out of control that the government is unable to function - which might be a scenario that some are hoping for in order to prompt the military to intervene."
(Reporting by Shaimaa Fayed, Patrick Werr, Asmaa Alsharif, Tom Perry, Maggie Fick, Yasmine Saleh, Omar Fahmy, Alastair Macdonald, Alexander Dziadosz and Shadia Nasralla in Cairo; Writing by Alastair Macdonald; Editing by Tom Perry)