The cabinet, which was reshuffled with several ministers fired late last month, said the Finance Ministry would allocate some 6.5 billion Egyptian pounds ($1.1 billion) to cover the raise, which increases salaries for around six million employees.

"The reason for the raise goes back to the fact that we sympathize with people and understand the lifestyle issues that they deal with," said Prime Minister Ahmed Shafik after the meeting.

The announcement comes two weeks after nationwide protests erupted, calling for the ouster of President Hosny Mubarak, greater employment opportunities and higher wages, among other demands. According to the UN, nearly 40 percent of the
population lives below or just at the poverty line of less than $2 a day.

Moreover, Egypt's economy is struggling to recover from the closure of banks and businesses during the protests. Banks reopened for limited business Sunday. Mahmoud Abdellatif, head of Bank of Alexandria, said business was better than expected, as deposits were greater than withdrawals.

Egypt's stock exchange announced it would reopen at the end of the week after a two-week closure triggered by the unrest that caused a 17-percent loss on the benchmark EGX30 index in the last two days it traded.

The military announced that the evening curfews in effect in Cairo, Alexandria and Suez would be reduced to 8 p.m. (1800 GMT) until 6 a.m. Late Monday, Google employee Wael Ghoneim was released after 10 days of arrest.

He sent a message via Twitter saying, "Freedom is a blessing that deserves fighting for."
There was speculation that he may have been behind the Facebook page that called for the Jan 25 protest, which kickstarted the largest anti-government protests since Mubarak took power nearly 30 years ago.

Life was returning to its normal pace throughout many parts of the country, with several international schools and universities announcing they would resume classes in the coming weeks. But in Tahrir Square, the home base for Cairo's protesters, hundreds of people are still camped out.

A memorial service was held earlier in the day for an Egyptian journalist killed during the violence. Ahmed Mahmoud, 39, worked for a state-owned newspaper and was shot Jan 29 while filming clashes between anti-government protesters and police in Cairo. He died six days later. His wife has called for an investigation into his death.

Efforts to return the country to normalcy were taking place following the first negotiations between the government and some opposition groups. The banned Muslim Brotherhood and other groups held their first talks with Vice President Omar Suleiman Sunday in a bid to find a political solution to the crisis.

While admitting the negotiations were still in their infancy, the Brotherhood said no substantive concessions had yet been offered. Committees were formed to look into core opposition demands, including constitutional reform and an end to the State of Emergency, which grants police wide-ranging powers.

Despite continued calls by protesters for the immediate ouster of Mubarak, the government, for now, is sticking to its position that he will leave when his term ends in September.

Meanwhile, Egyptian state television blamed "extremist groups" for a morning attack by unknown assailants, who used rocket-propelled grenades against security forces near Rafah, in the Sinai Peninsula, near the Gaza Strip. The attack injured two officers.

State-run news website Egynews reported that five people, three of whom were Palestinians, were arrested on charges of possessing weapons and ammunition in Sinai. A Saturday attack on a pipeline used to transport natural gas from the peninsula to Israel and Jordan was also blamed on "terrorists" seeking to exploit the unrest in Egypt.

In the US, President Barack Obama said Monday that Egypt is making progress in resolving its political crisis as talks between the government and opposition groups were underway.

"Obviously Egypt has to negotiate a path and they're making progress," Obama told reporters after delivering a speech to the business community in Washington. He not elaborate.

Late Sunday he said that there was room for a democratic Egypt to emerge, and the choice was not one between suppression and fundamentalist Islam.