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The Egyptian authorities have evicted hundreds of peasants from this village in southern Egypt because their mud brick houses, which have sat atop some of the world's most treasured and ancient tombs for centuries, were leaking sewage onto priceless antiquities.

The families have been resettled nearby in an Egyptian version of Levittown with running water and telephones. But 80 families are holding out, saying they want more from a government that has so far been reluctant to use brute force.

The Gurna standoff near the famed Valley of the Kings illustrates the challenges facing an authoritarian government that for decades imposed its will on the people keeping them poor but fed, under-employed but employed, but now seeks to adjust the social contract without sparking widespread unrest. The government has again imposed a solution — one that will change the way hundreds of families live — but is negotiating with those left behind until it finds terms that are acceptable, or at least accepted.

Political analysts say the dynamics here are similar to those all over Egypt as the government tries to transform a centrally controlled economy. In recent months thousands of workers in bloated state-owned factories have staged wildcat strikes, out of fear that privatization will take their jobs or demanding pay raises.

Since September there have been dozens of protests relating to economic demands. In each case, the government avoided the heavy-handed tactics it uses to silence political opposition.

"The state told its citizens to expect everything from it," said Nawal Hassan, a sociologist who has worked closely with the people of Gurna for many years, referring to promises of free education, low-cost food, and guaranteed jobs. "The economy was centralized and activities were controlled, and it was the government which was providing people with what they needed. You can't tell them now, 'Keep that mentality and manage on your own."'

In Gurna — which sits on the tombs of the Nobles and between the Valley of the Kings and the Valley of the Queens with their tombs that date back some 3,500 years — much of the familiar tableau of tourist kitsch and village life has been razed into piles of mud brick rubble.

Egyptian officials say that in Gurna they will finish the task because science and decency are on their side. They are preserving priceless antiquities and moving the villagers to a community with the running water that they lacked in Gurna. They complain that the holdouts are trying to extort the government. Under the plan, every married man receives a two-bedroom house in what is known as New Gurna. But the holdouts are pressing for one house for every son.

"Each family man is asking for a house for himself, and for one for his children," said Sabry Abdel Aziz, head of the Egyptian Antiquities Sector. "We are not distributing millions here. It is a problem of greediness."