In this image made from video, Egypt's Morsi delivers a TV address.
In this image made from video, Egyptian President Mohammed Morsi delivers a televised statement in Cairo, Egypt, December 6, 2012 Photo by AP
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Egyptian President Mohammed Morsi on Saturday annulled a controversial constitutional decree he issued last month granting him sweeping powers, which led to deadly protests across the country over the past week.

A referendum on an Egyptian draft constitution would still go ahead as planned on December 15, Islamist politician Mohamed Selim al-Awa said after a meeting between the presidency and independent and Islamist figures.

Earlier on Saturday, Egypt's military warned of "disastrous consequences"' if the crisis that sent tens of thousands of protesters back into the streets is not resolved, signaling the army's return to an increasingly polarized and violent political scene.

The military said serious dialogue is the "best and only" way to overcome the nation's deepening conflict over a disputed draft constitution hurriedly adopted by Islamist allies of President Mohammed Morsi, and recent decrees granting himself near-absolute powers.

"Anything other than that (dialogue) will force us into a dark tunnel with disastrous consequences; something which we won't allow," the statement said.

Failing to reach a consensus, "is in the interest of neither side. The nation as a whole will pay the price," it added. The statement was read by an unnamed military official on state television.