"The decision was wrong. Egypt will not surrender to American pressure and is continuing its path towards democracy as set by the roadmap," Foreign Ministry spokesman Badr Abdelatty said on Thursday.

Abdelatty later said in a statement the decision "posed serious questions around the United States' readiness to provide stable strategic support for Egypt's security programs".

Washington faces a dilemma in dealing with a major regional ally that controls the strategic Suez Canal and borders Israel but whose army overthrew the first freely elected president, Mohamed Morsi, after mass protests against his rule.

It said on Wednesday it would withhold deliveries of tanks, fighter aircraft, helicopters and missiles as well as $260 million in cash aid but left some other aid programs intact.

The US position highlights the dilemma and also exposes differences with key Persian Gulf ally Saudi Arabia, which had welcomed Morsi's removal and has lavished extensive financial support to the new government.

It also raises the question of where Egypt, the second largest recipient of US aid after Israel, could now turn for more military aid.

The decision was made pending progress on democracy and human rights but the State Department said it would continue military support for counter terrorism, counter-proliferation and security in the Sinai Peninsula. It will also continue to provide funding in areas such as education, health and private sector development.

The private Tahrir newspaper was even bolder in its criticism with a headline proclaiming, "Let the American aid go to hell".

NTJ/NJF