After arresting its leaders and killing hundreds of its supporters on the streets, the military-backed government in Egypt is now talking of disbanding the Muslim Brotherhood.

It is not clear, however, whether this a real threat or a ploy to block the Brotherhood from carrying out more mass demonstrations.

Over the past two weeks, the violence on the streets of Cairo and other Egyptian cities has dropped significantly but the government has not let up its pressure on the largest independent political party in the country.

The Supreme Guide of the Muslim Brotherhood, Mohammed Badie; his deputy, Khairet a-Shater; and the former president, Mohammed Morsi, are still under arrest and are being charged for their alleged involvement in violent attacks on security forces. At the same time, however, hundreds of the movement’s activists are still at large and the government has not shut down its operations entirely.

The military takeover two months ago seems to enjoy the support of most Egyptians. In addition, the new interim government has not suffered significant sanctions from the US administration and has received major financial support from Saudi Arabia and the United Arab Emirates. However, it still needs the Muslim Brotherhood, albeit as a weakened player.

Egypt’s minister of social solidarity, Ahmed El-Borai, admitted as much last week when he said at a press conference that the Muslim Brotherhood has no legal standing but added that banning the Brotherhood would give ammunition to claims in the West that the new government is acting undemocratically. But the “foreign allegations” are not the only reason the Egyptian generals are hesitating to outlaw the Brotherhood.

The Muslim Brotherhood may have lost much of its support over the last year due to the high-handed mismanagement of the country’s affairs by Mr Morsi, but is still the largest and best-organised party in Egypt.

Forcing it underground could be a recipe for prolonged chaos, and the generals are wary of going down the path of Algeria where a similar decision by the military in the 1990s sparked off a bloody civil war.

Both sides have a lot too lose. Beaten, bloodied and discredited, the Brotherhood urgently needs to start rebuilding its image as the grassroots organisation it was for decades until the 2011 revolution. This will be impossible if the movement is not allowed to work in public. The generals want calm to return to the country so an orderly election campaign can take place, after which they can return to their preferred position of wielding power behind the scenes. A Brotherhood shorn of its aspirations of power but participating in the electoral charade is its preferred scenario.