There is fury in Egypt this morning after president Hosni Mubarak defied predictions that he would resign and instead pledged to stay on as president until later this year.

Mr Mubarak used a feverishly anticipated televised speech to the nation to say he was delegating power to his deputy Omar Suleiman and proposing constitutional reforms, but said the transition to end his 30-year-reign would last until September's elections.

His speech was met with furious chants of "Down, Down with Mubarak" among the more than 200,000 people who packed Cairo's Tahrir Square on the 17th day of massive nationwide protests demanding the strongman's overthrow.

On Twitter, former UN nuclear watchdog head, Nobel Peace Prize winner and opposition figure Mohamed Elbaradei said: "Egypt will explode. Army must save the country now."

And there were fears that the situation would get even uglier later today, when huge crowds are expected to gather after Friday prayers.

In Tahrir Square the crowd chanted "neither Mubarak nor Suleiman!" as one elderly woman in the crowd moaned: "The old man just won't give up power."

"He is still speaking to us as if we were fools," said Ali Hassan, another protester.

"He is a general defeated on the battlefield who will not retreat before inflicting as many casualties as he can."

ABC correspondent Mark Willacy said hundreds of young men started surging towards the exits of Tahrir Square as Mr Mubarak confirmed that he was staying on. It was not clear where they were heading.

There were reports that some protesters were marching towards the presidential palace and state television building.

Hopes had run high that Mr Mubarak would step down immediately after the military leadership had announced hours earlier that it would step in to ensure the country's security and see that the people's "legitimate" demands were met.

But by the end of his speech Mr Mubarak remained the country's president.

"I have decided to delegate power to the vice-president based on the constitution," a frail Mr Mubarak said in a scratchy voice.

"I am conscious of the dangers of this crossroad... and this forces us to prioritise the higher interests of the nation."

He went on to take an apparent swipe at the United States and other countries that have pushed him to accelerate a transition to democracy, saying: "I have never bent to foreign diktats.

"I have always preserved peace and worked for Egypt and its stability."

In a speech aired shortly after Mr Mubarak's address had gone to air, Mr Suleiman, former head of the country's secret police, urged protesters to go home and "look to the future."

"We have opened the door for dialogue, we have reached and arrived at agreements," he said.

"I call on the youth of Egypt.. go back home, go back to your work. The country needs your hands, let's join hands to build and develop.

"Do not listen to satellite television stations, only listen to your own conscience. Use common sense.

"The clock is ticking for work, let's march forward. I have taken this oath before God and you to work for this homeland."

Earlier a communique issued by the Supreme Council of the Armed Forces said the army: "Will continue meeting... to examine measures to be taken to protect the nation and its gains and the ambitions of the great Egyptian people." The leader of Mr Mubarak's ruling party had also indicated that he expected the president to stand down.

'Not in vain'

"The blood of your martyrs was not shed in vain," Mr Mubarak said in remarks addressed to the hundreds of thousands of protesters who have taken to the streets over the last two weeks.

"All those who fell... their blood will not go down the drain.

"I confirm that I will not relent to penalise all those responsible... to the most severe sentences according to the law.

"I am totally determined and adamant to fulfil all the promises, genuinely and seriously. This commitment stems from my firm conviction... that your demands are lawful and legitimate."

Mr Mubarak said he would be delegating some powers to his vice-president Omar Suleiman, but would remain as president.

"Mistakes are likely in any regime, but it is important to admit to those mistakes," he said.

"I cannot find any embarrassment in listening to the youth of my homeland and responding to them. I cannot and will not accept to be dictated orders from the outside, no matter what the source is.

"I will safeguard the authority of the people until the September elections.

"I will continue to observe the implementation step by step, hour by hour... to ensure the proper implementation which will be supported by the intrepid armed forces."

"This will go by day by day until the path of peaceful transition in September."