Violence in Egypt continues to escalate following Wednesday’s military government crackdown on protestors, inciting a series of retaliation by Muslim Brotherhood in torching government buildings, police stations, and Christian churches. In response, the interim president has declared a State of Emergency and authorized the use of lethal forces to defend and subdue any attacks and uprisings.

U.S. President Obama announced Thursday the cancellation of a joint military maneuver with Egypt that was scheduled for mid-September, because Wednesday’s violence has claimed at least 500 lives and injured over 3,000. United States has been aiding Egypt with roughly $1.3 billion a year.

Obama stated that America would continue its “engagement” with the military government in Cairo in order to help it transition back to democracy. However, he has condemned the use of violence by both government forces and some among the protestors, which hampers the Egyptian aspiration towards reconciliation.

The death toll in Wednesday’s crackdown, which stood at 525, according to the latest Health Ministry figures, made it by far the deadliest day since the 2011 uprising against the longtime ruler and autocrat Hosni Mubarak. The Health ministry said Thursday that 3,717 people were wounded.

Interim President Adly Mansour declared a month-long state of emergency and imposed a 7 p.m. – to – 6 a.m. curfew in Cairo, a city of 18 million people, along with Alexandria and 12 other provinces. Armed forced were ordered to support the police in efforts to restore law and order and protect state facilities. In addition, police forces have removed camps and barricades with armored bulldozers.

Among those killed were three foreign journalists.

The two sides in Egypt are offering different estimates of the death toll. The Muslim Brotherhood, the organization that includes Morsi, puts the death count at more than 2,500.

The widow of a dead Muslim Brotherhood supporter touches her husband's hand at El Eyman mosque in Cairo August 15, 2013. A Reuters witness counted 228 bodies, most of them wrapped in white shrouds, arranged in rows on the floor of the Imam mosque in northeast Cairo, close to the worst of Wednesday's violence between police and demonstrators.

Interim Prime Minister Hazem el-Beblawi said in a televised address to the nation that it was a “difficulty day” and that he regretted the bloodshed, according to Fox News. He said the government could not indefinitely tolerate a challenge to authority that the 6-wee-old protests represented.

“We want to see a civilian state in Egypt, not a military state and not a religious state,” said el-Beblawi.

While democratically elected, the ousted Morsi government “was not inclusive and did not respect the views of all Egyptians,” Obama said. Millions of protestors and Egyptians supported his removal. However, he lamented the recent crackdown by the interim military government.

Obama said it has now taken “a more dangerous path” that includes “arbitrary arrests, a broad crackdown on Mr. Morsi’s associations and supporters, and now, tragically, violence that’s taken the lives of hundreds of people and wounded thousands more.”

Members of both the interim government and Morsi supporters accused the Obama administration of supporting the other side, but Obama said the United States isn't taking any side.

"We want a peaceful, democratic, prosperous Egypt," Obama said. "That's our interest. But to achieve that, the Egyptians are going to have to do the work."