At least 38 supporters of the Muslim Brotherhood have died in an incident at an Egyptian prison, security and legal sources said, giving conflicting versions of the deaths.

The Interior Ministry did not immediately confirm the death toll.

It said in a statement that a number of detainees had tried to escape from a prison on the outskirts of Cairo and had taken a police officer hostage.

In subsequent clashes, the ministry said an undisclosed number of people had died from inhaling tear gas rounds.

It added that the officer was freed but badly wounded.

However, a legal source told Reuters that the Brotherhood followers had suffocated in the back of a crammed police van while being taken to prison.

Over 800 people have died in Egypt since last Wednesday in clashes pitting backers of deposed Islamist president Mohammed Mursi and security forces.

Police said they have arrested over 1,000 Brotherhood sympathisers in recent days as part of a broad crackdown aimed at ending weeks of political turmoil.

Meanwhile, Egypt's deputy prime minister was expected to propose a way out of confrontation between the security forces and the Muslim Brotherhood when the cabinet discussed the crisis today.

His ideas seemed to run counter to a suggestion by the prime minister to dissolve the Islamist organisation.

The Brotherhood has been the target of a crackdown by the army-backed government last week.

The authorities declared a state of emergency and killed hundreds of people in raids on Wednesday on two protest camps set up in Cairo to demand Mursi's reinstatement.

The capital's streets, unusually empty in the past few days, have been returning to normal.

The army kept several big squares closed and enforced a curfew overnight.

Banks and the stock market reopened for the first time since Wednesday's bloodshed, and shares plunged 2.5% per cent.

The initiative by liberal Deputy Prime Minister Ziad Bahaa el-Din calls for an immediate end to the state of emergency, political participation for all parties, and guarantees of human rights, including the right to free assembly.

The Brotherhood has said it will keep up mass protests until Mr Mursi - toppled by the army on 3 July after huge demonstrations against him - is freed from jail and returned to office.

Polarised Republic

It was not clear how much support Mr Bahaa el-Din's proposal could win among political leaders in the deeply polarised country.

Prime Minister Hazem el-Beblawi has proposed banning the 85-year-old movement and effectively forcing it underground.

"There will be no reconciliation with those whose hands have been stained with blood and who turned weapons against the state and its institutions," Mr Beblawi told reporters on Saturday.

Mr Bahaa el-Din stayed in office even after a leading fellow-liberal, Deputy President Mohamed El Baradei, resigned over the violent break-up of the protest camps in Cairo.

His proposal does not address Mr Mursi's fate or specifically call for an amnesty for detained leaders of the Brotherhood.

The Islamist group, which won five successive votes held in Egypt after President Hosni Mubarak fell in 2011, now faces the prospect of political elimination by army-backed rulers who say the most populous Arab nation is at war with "terrorism".

During Mr Mursi's year in power, accusations of incompetence and attempts to monopolise government tarnished the reputation the Brotherhood had acquired for social work and upholding Islamic principles in 30 years of opposition to Hosni Mubarak.

Brotherhood leaders accuse the military of deliberately sabotaging their time in office and plotting their demise.

EU to review Egypt ties

European Council President Herman Van Rompuy and European Commission President Jose Manuel Barroso have urged all sides to show restraint and prevent further violence, saying the EU would urgently review its relations with Egypt and act accordingly.

The crackdown has, however, drawn messages of support from wealthy Arab allies such as Saudi Arabia, which have long feared the spread of Brotherhood ideology to the Gulf monarchies.

The US has delayed delivery of four F-16 fighters to Egypt and cancelled a joint military exercise to rebuke the army for its actions, but it has not halted the $1.55bn in mostly military aid that it gives Cairo every year.

Interim Foreign Minister Nabil Fahmy sought to pre-empt any attempt by the West to pressure Egypt by cutting financial aid by announcing he would scrutinise all foreign assistance.

"By reviewing aid I want to determine what is useful and what is not and what aid is being used to pressure Egypt and whether this aid has good intentions and credibility. We will proceed based on our findings," he told reporters on Sunday.

"We are not looking to replace one friend with another but we will look out to the world and continue to establish relations with other countries so we have options," he said.

"The relation between Egypt and the US has been there for a long time. It has been through ups and downs in the past. We hope things will go back to normal promptly," Mr Fahmy said.

The Foreign Ministry also distributed a pack of photos showing what it said were Muslim Brotherhood members carrying clubs and firearms - and in one picture a black al Qaeda flag.

The Brotherhood denies links to the global militant network.

On Saturday, Mursi supporters exchanged fire with security forces in a central Cairo mosque where scores of protesters had sought refuge from confrontations with police the day before.

Police cleared the building and made arrests, with onlookers cheering them on and harassing foreign reporters at the scene.

"We as Egyptians feel deep bitterness towards coverage of the events in Egypt," presidential political adviser Mostafa Hegazy said, accusing Western media of ignoring attacks on police and the destruction of churches blamed on Islamists.

At least 173 people were killed on Friday during a "Day of Rage" called by the Brotherhood two days after police destroyed its protest camps.

Police have since arrested more than 1,000 Brotherhood "elements". The state news agency said 250 faced possible charges of murder, attempted murder or terrorism.

The Brotherhood has called for daily street protests this week, but there were no reports of trouble on Sunday morning.