By Michael Georgy and Maggie Fick
CAIRO, Aug 7 (Reuters) - Egypt must release jailed Muslim Brotherhood leaders to help end political turmoil following the overthrow of Islamist President Mohamed Mursi, Qatar's foreign minister said as international mediation efforts to avert more bloodshed appeared to be fading.
Khaled al-Attiya, who has been trying to mediate an end to the crisis along with envoys from the United States, European Union and United Arab Emirates, returned home on Wednesday after several days in Cairo.
"My wish for the brothers in Egypt is to release the political prisoners as soon as possible because they are the key to unlocking this crisis," he told Qatar-based Al Jazeera television in an interview.
Qatar was the main financial backer of Mursi's Muslim Brotherhood-dominated government which ruled Egypt for a turbulent year until a July 3 military takeover backed by massive street demonstrations.
"Without a serious dialogue with all the parties, and most importantly with the political prisoners because they are the main element in this crisis, I believe things will be difficult," Attiya said.
His comments echoed those of two senior U.S. senators who, after talks in Cairo on Tuesday, forecast bloodshed within weeks unless the new authorities released prisoners and began a national dialogue including the Brotherhood. Their warning drew an official rebuke and Egyptian media outrage.
The Dutch foreign minister was the latest foreign emissary due to hold talks with his Egyptian counterpart, the prime minister and the president and other officials on Wednesday as time appeared to be running out for a diplomatic solution.
Fears that Mursi was trying to establish an Islamist autocracy, coupled with a failure to ease economic hardships afflicting most of Egypt's 84 million people, led to mass street protests, triggering the army intervention.
Almost 300 people have been killed in political violence since the overthrow, including 80 shot dead by security forces on July 27.
Mursi's supporters have been staging sit ins and two areas of Cairo to demand his reinstatement. Egyptian authorities have said their patience has limits.
TALKS ON THE ROCKS
Prospects of a negotiated end to the crisis looked to be on the rocks on the last day of the Muslim fasting month of Ramadan, with the army-installed government reportedly ready to declare that foreign mediation efforts had failed.
However a person directly involved in the mediation effort told Reuters: "It's still open. We are still trying."
State-run Al-Ahram newspaper, citing official sources, said the government would make an announcement to that effect soon.
The paper said the authorities would also declare that Muslim Brotherhood protests were non-peaceful - a signal that the government intends to end them by force.
Interim head of state Adly Mansour, installed by the military after Mursi's ouster, was due to address the nation later on Wednesday ahead of the Eid al-Fitr Muslim feast which begins on Thursday. Egypt traditionally closes down for several days for the Eid.
A military source had earlier said the interim government and army were mulling the possibility of releasing Muslim Brotherhood detainees in a bid to end the turmoil.
But now that the judiciary has taken up the cases and set trial dates for top Brotherhood leaders, it may be difficult for army chief Abdel Fattah al-Sisi, who toppled Mursi, to offer releases.
It may be easier to release the head of the Brotherhood political party, Saad al-Katatni, who like Mursi is under judicial investigation but has not been charged.
The country's first freely elected president, Mursi is now being detained at an undisclosed location and thousands of his supporters remain camped out at two protest sites in Cairo.
The al-Ahram report doused hopes of a breakthrough, with the government-owned media casting the blame on what it called the intransigence of Mursi's Muslim Brotherhood.
The newspaper said the interim government would announce "the failure of all U.S., European, Qatari and UAE delegations in convincing the Brotherhood of a peaceful solution to the current crisis".
Asked to comment on the newspaper report, a senior U.S. State Department official in Washington said: "We are still committed to our ongoing efforts at calming tensions, preventing violence and moving toward an inclusive political process."
Two U.S. senators who visited Cairo on Tuesday, Lindsey Graham and John McCain, called on the military to release political prisoners and start a national dialogue to return the country to democratic rule.
"I didn't know it was this bad. These folks are just days or weeks away from all-out bloodshed," Graham told the CBS network. (Additional reporting by Sami Aboudi in Dubai; Editing by Paul Taylor)