Egypt´s Islamist President Mohamed Morsi has emerged empowered after a "revolutionary" decision to dismiss his powerful defence minister and curb the military´s sweeping powers, media said Monday.

In a surprise move, Morsi on Sunday retired Defence Minister File Marshal Tantawi, 76, and armed forces chief of staff Sami Anan and scrapped a constitutional document that gave the military legislative and other powers.

The Egyptian press on Monday described Morsi´s move as "revolutionary", with some saying it was aimed at curbing the powers of the Supreme Council of the Armed Forces (SCAF).

The state-run Al-Akhbar newspaper said the dismissal of Tantawi, who headed the SCAF for more than a year after massive streets protests forced Mubarak to step down, was a "revolutionary decision."

"The Brothers officially in power," declared the independent Al-Watan daily, referring to the Muslim Brotherhood, the Islamist group which backs Morsi and through whose ranks he rose before his election triumph.

Thousands of Islamist supporters on Sunday flooded Cairo´s Tahrir Square -- cradle of the revolution that toppled former president Hosni Mubarak last year -- to celebrate.

"The people support the president´s decision," the crowd chanted. Others mocked Tantawi´s departure, presented officially as a retirement.

"Marshal, tell the truth, did Morsi fire you?" they said. Morsi in a late night speech on Sunday denied trying to marginalise the army, saying he was acting in the interests of the country.

"I never intended, through my decisions, to marginalise or be unjust toward anyone, but rather to act so that we advance toward a better future, with a new generation, long-awaited new blood," Morsi said. "I did not intend to embarrass institutions," he added, saying he had "the interest of the country in mind."

Morsi also amended the interim constitution to deny the military any role in public policy-making, the budget and legislation, and the right to pick a constituent assembly drafting a permanent constitution for post-Mubarak Egypt.

"The president has decided to annul the constitutional declaration adopted on June 17" by the SCAF, headed by Tantawi, his spokesman Youssef Ali said.

Mourad Ali, a senior official with the Brotherhood´s Freedom and Justice Party, which fielded Morsi in the May-June presidential polls, praised the president.

"Given the circumstances, this is the right time to make changes in the military institution," the Islamist official said. "He is a strong president, and he is exercising his authority."

Sunday´s announcements marked a new twist in uneasy ties between Morsi and the army, testing the balance of power between the first civilian president in Egypt´s history and a military that had moved to limit his power.

Tantawi, who had served as Mubarak´s defence minister for two decades, was replaced by replaced by Abdel Fattah al-Sissi a member of the SCAF.

The veteran officer as well as chief of staff Anan were awarded the Greatest Nile Collar, Egypt´s most prestigious award, and both were retained as presidential advisors.

But Morsi also shuffled members of the SCAF into other strategic public sector jobs, like Vice Admiral Mohab Mamish, the head of the navy, who was tasked with overseeing the key revenue earner Suez Canal Authority.

Morsi, an Islamist who rose through the ranks of the Muslim Brotherhood before his election triumph, also decided to appoint a vice president.

He appointed judge Mahmud Mekki as his deputy, MENA reported, making him only the second vice president to be named in Egypt in 30 years. Sunday´s shakeup is the latest in a series of moves by Morsi a week after a deadly attack on the Egyptian military in the Sinai prompted an unprecedented military campaign in the lawless peninsula.

Last week Morsi replaced his spy chief and dismissed top security and political officials in the Sinai as well.

In Israel, a government official expressed "great concern" over developments in Egypt while media suggested the removal of figures such as Tantawi would force Israel to seek new interlocutors in Egypt. Israel and Egypt signed a peace treaty in 1979, and although ties were frosty, security cooperation between the two countries´ armies remained solid.

"The change of security and military leadership in Egypt will require Israel to open channels of dialogue with the new figures, not all of whom are familiar faces," an analysis in Maariv newspaper said.

"It is too early to say what will happen because everything is evolving in Egypt, but we are following what is happening there with great concern," the Israeli official told AFP.

In Cairo the independent daily Al-Shorouk expressed concern over the action, saying it meant that Morsi was accumulating "much bigger prerogatives than those of Mubarak." (Copyright © 2012 Agence France Presse. 08/13/12)