* Presidency says talks failed, blames Muslim Brotherhood
* U.S. envoy leaves Cairo without comment
* U.S. senators forecast bloodshed within weeks if no dialogue
* Stage set to clear pro-Mursi sit-ins by force (updates with Brotherhood comment)
By Michael Georgy and Maggie Fick
CAIRO, Aug 7 (Reuters) - Egypt's army-installed government said on Wednesday diplomatic efforts to resolve the political crisis had failed and signaled it was gearing to take action against supporters of deposed President Mohamed Mursi gathered at two protest camps in Cairo.
Envoys from the United States, European Union, Qatar and the United Arab Emirates had been trying to defuse the crisis and prevent further bloodshed.
But President Adli Mansour's office said the period of international efforts, which began more than 10 days ago, had "ended today".
Soon after, interim Prime Minister Hazem el-Beblawi said the government's decision to dismantle the protest camps was final and its patience had nearly expired.
The protesters had "broken all the limits of peacefulness", Beblawi said, accusing them of inciting violence, blocking roads and detaining citizens.
Any use of weapons against policemen or citizens would "be confronted with utmost force and decisiveness," he said.
The breakdown in mediation efforts and the threat of action against the protesters brought the political crisis in the Arab world's biggest nation to a dangerous new phase.
"I didn't know it was this bad. These folks are just days or weeks away from all-out bloodshed," U.S. senator Lindsey Graham told the CBS network after he met officials from both sides in Cairo on Tuesday.
Muslim Brotherhood spokesman Gehad El-Haddad, asked about threat against the protest camps, told Reuters: "This means they are preparing for an even bigger massacre. They should be sending us positive signals, not live bullets."
However, any action could still be some time away.
The country celebrates the Eid el-Fitr holiday marking the end of the Islamic fasting month of Ramadam from Thursday to Sunday, an inauspicious time for any act of violence.
And Egypt's leading Islamic authority on Wednesday announced plans to host talks on the crisis after Eid, which might also forestall an assault by the security forces.
"There are some initiatives that can be built upon to start national reconciliation," an al-Azhar official told the state news agency MENA.
READY TO RESIST
The army ousted the Islamist Mursi, Egypt's first freely-elected leader, on July 3 after huge street demonstrations against his rule and installed an interim civilian government.
Mursi and leaders of his Muslim Brotherhood have been rounded up and detained. But thousands of their supporters have demonstrated to demand his reinstatement.
Almost 300 people have been killed in political violence since the overthrow, including 80 Mursi supporters shot dead by security forces in a single incident on July 27.
On Wednesday afternoon, people streamed into the camp outside Rabaa al-Adawiya mosque in northeast Cairo, where demonstrators have built brick and sandbag barricades and armed themselves with sticks and rocks. Their numbers included many women and children.
"We will not leave until we get Mursi back," said Salma Imam, 19, student at Al-Azhar university. "It's not a government, the real government was chosen by the Egyptian people one year ago. This is not a legal government."
Prime Minister Beblawi said in his address people should leave the camps now. Those whose hands were not "sullied with blood" would not face legal action, he said.
The presidency said it held the Muslim Brotherhood completely responsible for the failure of the diplomatic push, and also for any events that might result from this "related to breaches of the law and endangering civil peace".
The international envoys had shuttled between the two sides for more than a week seeking to find a compromise.
The government had met the envoys and allowed them to see jailed Muslim Brotherhood leaders, a presidency statement said. The aim was to urge the Brotherhood to "respect the will of the people" who had protested to demand an end to Mursi's rule.
"These efforts did not achieve the hoped-for success, despite the complete support the Egyptian government offered," it said.
Mohamed Ali Bishr, a senior Brotherhood politician who has represented the group in the talks, told Reuters he needed time to confer with other Brotherhood leaders before responding to the presidency's statement.
Mursi's downfall was driven by fears he was trying to establish an Islamist autocracy, coupled with a failure to ease economic hardships afflicting most of Egypt's 84 million people.
The army says it was acting at the behest of the people and has lain out its own transition plan for new election, a move rejected by the Brotherhood.
Pro-Mursi parties and leftists who backed his removal called rival street demonstrations for Thursday, making the public holiday a potential flashpoint.
The National Alliance to Support Legitimacy, which includes the Brotherhood, urged Mursi supporters to take to the streets for an "Eid of Victory".
The leftist Popular Current party called for public Eid prayers in Tahrir Square, centre of the 2011 uprising that ousted autocrat Hosni Mubarak, and in squares across Egypt.
ENVOY DEPARTS CAIRO
The senior U.S. diplomat involved in the mediation effort, U.S. Deputy Secretary of State William Burns, left Egypt on Wednesday shortly after the government declared the diplomatic efforts had failed.
The European Union said it was very concerned by the breakdown. A spokesman for EU foreign policy chief Catherine Ashton said the EU would continue to encourage a national dialogue involving all sides with a goal to restoring democracy.
EU envoy Bernardino Leon was still in Cairo talking to all sides, the spokesman said.
On Tuesday, the U.S. senator Graham and his colleague John McCain, called on the military to release political prisoners and start a national dialogue. But Egyptian officials and media reacted angrily to their criticism.
Presidential spokesman Ahmed al-Muslimani said Egypt "did not need a certificate of good conduct or behavior from anyone".
(Additional reporting by Tom Perry and Tom Finn in Cairo and Adrian Croft in Brussels; Writing by Angus MacSwan; Editing by Michael Roddy and David Evans)
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