CAIRO A crackdown on U.S.-funded pro-democracy groups in Egypt and a bill before Parliament that would further restrict the work of nongovernmental organizations here are inhibiting development work and activism during a period many Egyptians hoped would be marked by greater freedoms.

A few months before Egyptians are to elect a new president, groups that have played key roles in the elections of emerging democracies elsewhere in the region are paralyzed by a widening criminal probe of such organizations, backed by the country's ruling generals. Other NGO workers in Egypt are trying to keep a low profile, saying they worry about being named in the legal case or otherwise affected by the broader cloud of suspicion now hanging over foreign-funded groups.

"This has become a huge impediment to the U.S.'s ability to deliver and to have an impact with its aid," said Stephen McInerney, executive director of the Washington-based Project on Middle East Democracy. "This is casting a real shadow over all U.S. assistance to Egypt."

Egyptian activists who are not targets of the probe say it has set an ominous tone for human rights and political freedoms in Egypt - two of the main goals of a popular revolt that toppled President Hosni Mubarak a year ago. The concerns triggered by the crackdown have been exacerbated by a draft law that would close the loopholes allowing NGOs to register as corporations or other types of private entities.

"The working environment has become poisoned by this crackdown," said Hossam Bahgat, an Egyptian human rights advocate. "The consistent message of vilification of human rights has become much worse since these raids and these indictments."

Military leaders meet

U.S. officials had reportedly held out hope that the ruling military council could be persuaded to end the probe of groups that include the Washington-based International Republican Institute and the National Democratic Institute.

Gen. Martin Dempsey, the chairman of the Joint Chiefs of Staff, met with Egypt's military rulers in Cairo on Saturday. Official statements on the meeting gave no details on their talks about the grim backdrop of the visit - Egypt's crackdown on American NGOs. At least 16 Americans, including the son of Transportation Secretary Ray LaHood, are among those facing charges of illegally receiving foreign funds.

Despite the mounting pressure from Washington, however, the generals have shown no signs of backing down.

Protesters continue to demand the council's removal, most recently by calling for a mass strike on Saturday, the one-year anniversary of Mubarak's ouster. Egypt's foreign reserves are running dangerously low, and the tourism industry, a pillar of the economy, is in a tailspin. In the face of such woes, Bahgat and other critics say, the military-led government appears to be using the NGO investigation to bolster its popular support by portraying it as a principled stance against U.S. meddling.

"When presented this way, most Egyptians side with their army and against the Americans," Bahgat, the human rights advocate, said.

The criminal case against the NGOs has prompted threats from U.S. lawmakers and rebukes from members of the European Parliament. Sen. Rand Paul, R-Ky., said last week that the United States ought to suspend the nearly $1.5 billion in aid the United States is expected to give Egypt this year, unless the country's military chiefs cease "using American citizens as scapegoats for the continuing upheaval in Egypt."

A European Union parliamentary delegation, meanwhile, announced Friday that it was canceling a planned visit to Cairo, saying in a statement that the "authorities' legitimacy is questionable."

McClatchy Newspapers reporter Hannah Allam contributed.