When Hatshepsut decided to carve her funerary temple into the mountainside at Thebes some 3,400 years ago, she cast about for a site that would demonstrate her power in the most dramatic way possible.

She chose well. Set against an amphitheatre-like arc in the Theban cliffs, her multi-level monument remains one of the most impressive sites in Egypt. The pillared halls that cut across the mountain, the gentle incline of the majestic ramps, the large terraces that were once filled with perfumed gardens; all are testament to the ingenuity of ancient Egyptian engineering and the supreme arrogance of a pharaoh's power.

But, tragically, what rendered this place so magical also made it perfect for terrorists. The wide open terraces, the long ramps that form the only exit, the vast halls with only pillars to hide behind turned the majestic temple into a slaughterhouse last Monday, when six Islamist militants shot and hacked more than 60 people to death.

As tourists continue to stream out of the country following the horror, stunned Egyptians are trying to come to terms with what happened. For while they have lived with the sporadic attacks of militants for the past five years, nothing prepared them for such blood-thirsty savagery at one of their national monuments, where gunmen mutilated bodies and even danced as they went about their gruesome task.

"This couldn't have been done by Egyptians" is the familiar refrain heard everywhere from chic restaurants in Cairo to the dusty lanes of the countryside. "They were agents of the Israelis," one designer-clad mother confided on Thursday, a reflection of the tension between the two countries of late.

Taxi-drivers theorise about an Iranian or Sudanese connection. Others talk of Algerians infiltrating the countryside. One engineer was adamant that the CIA was behind the incident. It was, he said, designed to punish the Egyptians for not toeing the US line over the issues of Iraq and Israel.

In the absence of transparent government or a free press, conspiracy will always provide answers for seemingly inexplicable events, and the official stand on the massacre did little to enlighten people.

"It is a fact of life that we are living in a violent world and criminals are everywhere. So this is something you cannot prevent," the Tourism Minister, Mr Mamdouh el-Beltagi, told reporters in London where he was attending a travel fair.

This was hardly reassuring. Similar sentiments were expressed by President Hosni Mubarak as he toured tourist sites on Tuesday in his own attempt at damage-limitation.

Having replaced his Interior Minister and promised to improve security at all antiquities sites, he said: "Such people who kill human beings are not Muslims, Christians or Jews. . . they are criminals. They are given money from outside the country." But official denial and a beefed-up police presence will not change the fact that the men who carried out Monday's carnage were part of a larger movement that uses religious ideology in a bid to overthrow the government.

Militant Islam is not new in Egypt. It has been part of the political scene since the early part of the 20th century and has often resulted in violence. Its continued presence is due to a complex mixture of social and political factors.

Egyptian society has always been religious, but this has strengthened in the past 25 years, a phenomenon which many say was at least partly brought about by the perceived failure of secular government in President Gamal Abdel Nasser's socialist experiment of the 1950s and 1960s, coupled with the country's humiliating defeat by Israel in the 1967 war.

Added to this gradually increasing religiosity have been economic stagnation and massive population growth resulting in overburdened state services and increased poverty. Although the government has recently embarked on an ambitious programme of economic reform, the benefits have not been felt by the majority.

It is, therefore, no coincidence that the bulk of the militant groups' membership comes from the lower middle classes and the poor, and particularly from the traditionally-neglected provinces in upper Egypt.

Under a regime which brooks no political opposition, religion provides both an outlet and a cover for their frustration. Successive Egyptian governments have also used, or misused, Islam as a political tool, often to their peril, as President Anwar el-Sadat found out when he was assassinated by the Takfir wal Higra group in 1981.

Sadat had encouraged the growth of Islamist groups in universities during the 1970s to counteract a leftist student movement opposed to his rule. It was this policy which fostered the emergence of the main Islamist group active in Egypt today: al-Gama'a al-Islamiya (or Islamic Group).

The Gama'a has been engaged in a violent campaign to overthrow the government since 1992. It claims that it wants to cripple the state and to this end it says it aims to hit tourism, an important source of foreign currency, not tourists. And although more than 1,200 people had been killed in the violence until Monday, only 35 were foreigners. The rest have been mostly the militants themselves and policemen.

However, unlike in Algeria, this violence has cost the militants the support of all but the tiniest minority of Egyptians. It has also depleted their ranks. Thousands of suspected Islamists or their sympathisers have been arrested and held, often without trial. Most of those leaders who didn't manage to escape the country in the early 1990s are now in jail.

But the government's often draconian response to the violence has led to widespread human rights abuses, including torture and extra-judicial killing. Alleged militants are tried in military courts which hand down tough sentences which can only be repealed by the President. So far 90 people have been sentenced to death and 57 have been executed.

Moreover, the government has widened its police operations to include the non-violent Muslim Brotherhood, cutting off any form of expression to the moderates from the bulk of the Islamist movement.

The state argues that the Brotherhood and the violent extremists are one and the same and that its iron-fist policy is necessary to deal with terrorists. To be sure, the security forces have successfully weakened the organisational structure of the Gama'a. As a result, during the past two years its operations have been largely confined to the southern provinces of Minya and Assiut. However, critics point out that the state's often clumsy strong-arm tactics have simply hardened the Islamists' resolve and contributed to the violence. "It's a vicious cycle of terrorism and counter-terrorism. The militants are using violence against the government, which is responding in kind through the courts," said a lawyer at the military trial of 66 militants who were in court even as killers were at work in Hatshepsut's temple.

Critics also say that the government's inability to allow even peaceful Islamist opposition marginalises the moderating forces of the movement. "There must be a channel of expression for moderates," said a political analyst, Mr Diaa Rashwan. "You can't deal with the violent Islamic movements as if they are criminal movements."

For many people in Egypt, Monday's attack was proof that the government must change its approach to Islamist opposition if it truly wishes to end the violence. The unprecedented scale of the bloodshed and the clear indication that the attack was a suicide mission, both a departure from anything perpetrated by the Gama'a before, are signs that the group is splintered and on the run. And therefore, say analysts, almost impossible to stop.

Two apparently rival claims of responsibility for the bloodshed would appear to reinforce this view. In a statement faxed to news agencies, the Gama'a said it carried out the carnage, intending to take tourists hostage and secure the release of their leader, Dr Omar Abel Rahman (currently in jail on bombing conspiracy charges in the US) and other jailed members.

However, the attackers clearly made no effort to take hostages and leaflets found stuffed into victims' knife-wounds and in the gunmen's pockets bore no resemblance to the Gama'a statement.

The leaflets also mentioned an expatriate leader of the group who is currently assumed to be living in Afghanistan. Like others living abroad, he is far more radical than the jailed leadership in Egypt, whose members are thought to have been discredited in the eyes of the rank-and-file after calling for an unconditional ceasefire with the government last summer.

In spite of this radicalisation and the accompanying rise in violence, however, few believe that Monday's attack threatens Egypt's stability. "They didn't need an army to do what they did," said one veteran Arab journalist who writes on Islamist militancy. "They attacked tourists because they knew security was lax and because they aren't strong enough to get to government officials."

But the change in tactics and splintering into more desperate - and dangerous - suicide brigades means that without some creative thinking on the part of policymakers, sporadic and bloody incidents like the nightmare that took place in Hatshepsut's temple are likely to continue.