© The Associated Press//Khalil HamraEgyptian policemen sit in front of Egyptian employees of several pro-democracy groups charged with using foreign funds to foment unrest during their trial in Cairo, Egypt, Sunday, Feb. 26, 2012.
Cairo - Egypt lifted a travel ban Wednesday on seven Americans charged with fomenting unrest by working for illegally funded pro-democracy groups, signaling an end to the worst crisis in Egypt-U.S. relations in 30 years.

The clash put $1.5 billion in annual American aid to Egypt at risk and sparked intense behind-the-scenes negotiations between the two countries to find a way out.

Defense lawyer Tharwat Abdel-Shaheed said the seven Americans, including the son of U.S. Transportation Secretary Ray LaHood, could only leave the country if they post bail of 2 million Egyptian pounds (about $300,000). They have also signed pledges to attend their next hearing.

"The ban was lifted on humanitarian grounds, but the bail is way too high," Abdel-Shaheed, who represents some of the American defendants, told The Associated Press.

Secretary of State Hillary Rodham Clinton said the United States was encouraged by reports the ban was lifted but added she had no confirmation.

Egyptian officials said the travel ban was lifted by the country's top prosecutor at the recommendation of the case's investigating judge. The officials spoke on condition of anonymity because of the sensitivity of the case.

It was not immediately clear whether the charges against the Americans would be dropped.

But even before the ban was lifted, there were signs the case was dissolving under intense U.S. pressure. The trial of more than 40 U.S. and foreign aid workers opened on Sunday and was adjourned until late April. The court's three judges excused themselves from the case on Tuesday, citing "uneasiness."

Only the Egyptian defendants attended Sunday's hearing, and the judge gave no instructions to police to ensure the American and other foreign defendants attend the next hearing.

The workers were charged following a December raid by Egyptian security of offices of 10 nonprofit pro-democracy and human rights groups, confiscating documents and equipment. The groups were accused of financing protests over the past year with illegally obtained funds and failing to register with the government as required.

The groups insist their financing is transparent, and all their efforts to register have been stalled by the Egyptian government.

The seven Americans who were banned from leaving are among 16 Americans on trial in the case. The other Americans had already left the country before charges were filed against them. Twenty-seven others are on trial, including 16 Egyptians as well as German, Palestinian, Serbian and Jordanian citizens. The travel ban on the non-American foreigners in the case has also been lifted if bail is posted.

The defendants faced charges of using illegally obtained funds to incite protests against the military rulers. They worked for a variety of democracy-promoting organizations, including four U.S. groups.

The heavily publicized case of the four U.S. pro-democracy groups has been linked to the turmoil roiling Egypt since an 18-day popular uprising forced Hosni Mubarak to step down in February last year after three decades in power.

Rights activists have sharply criticized the investigation into the civil society groups and the charges against the workers. They say it is part of an orchestrated effort by the ruling generals to silence critics and cripple organizations critical of their handling of what was supposed to be a transition to democracy.

The charges dovetail with constant pronouncements from the military that protests against their rule are directed by unnamed, dark foreign forces, a claim that is ridiculed by Egyptian activists. Still, the case resonated among many Egyptians who often suspect foreigners, particularly from the West, of meddling in Egypt's affairs.

Egypt and the United States have been close allies since the late 1970s, soon after the Egyptians abandoned decades of partnership with the Soviet Union and signed a peace treaty with Israel, the first Arab nation to do so. Informally, U.S. aid to Egypt is hinged on Cairo keeping the peace with Israel.

U.S. officials, furious over the case, have threatened to cut off aid to Egypt - $1.3 billion in military aid this year and $250 million in economic assistance.

The suspicion of foreigners among some Egyptians was exploited by the generals against the small but vibrant segment of the population opposed to their rule. They used their allies in the media and the Islamist-dominated parliament to portray their critics as agents of foreign powers while projecting an image of themselves as the nation's true patriots.

Over the past few weeks, a senior Cabinet minister was quoted as saying the United States and its close ally Israel worked to stop Egypt from becoming a democratic and prosperous nation after the ouster of Mubarak, a close U.S. ally.

Reports in the state media spoke of Egyptian intelligence reports that employees of the nonprofit groups were linked to the CIA.

The final resolution of the case, which would follow a string of high-profile visits to Egypt by top U.S. figures, will be seen by some as a climbdown by the generals in the face of U.S. pressure.

Curiously, the crisis erupted while the military - the Egyptian institution that benefited the most from the close ties with Washington - was at the helm. That prompted many to speculate that the generals may have all along intended to back down at the point where they believe they have harvested all possible domestic gains from the crisis.

The ruling generals are led by Field marshal Hussein Tantawi who served as Mubarak's defense minister for 20 years.

Nonprofit, pro-democracy groups have trained thousands of young Egyptians in political activism and organizing, an education that played a key part in the success of last year's uprising.

Abdel-Shaheed said that all four U.S. groups - the International Republican Institute, the National Democratic Institute, Freedom House and a group that trains journalists - have completed registration requirements set by Egyptian authorities, a process that could greatly weaken the case against them.