(Reuters) - State-run newspapers splashed accusations of a U.S. plan to spread "anarchy" in Egypt across their front pages on Tuesday, escalating a dispute Washington says must be resolved to ensure their continued military cooperation.

Based on remarks by a government minister, the headlines marked another low in the crisis between Washington and Cairo triggered by the investigation into U.S.-based non-governmental organisations that has led to criminal charges against Americans who have been prevented from leaving the country.

"America is behind the anarchy," declared the front page of Al Gomhuria newspaper. "American funding aims to spread anarchy in Egypt," read the front page of Al Ahram newspaper. The papers are two of Egypts most widely distributed dailies.

The headlines were based on comments made in October to the investigating judges by Minister of International Cooperation Faiza Abul Naga - but which only came to light on Monday when they were released to state news agency MENA.

Like Al Ahram and Al Gomhuria, MENA is part of a state-run media loyal to the government which has long been a tool for shaping public opinion in favour of Egypts establishment.

In her remarks, Abul Naga linked what she said was a surge in U.S. funding for civil society groups last year to an attempt to steer the course of the post-Hosni Mubarak transition in "a direction that realized American and Israeli interests."

"All the indications show that there was a clear desire to abort any chance for Egypt to emerge as a modern democratic state with a strong economy," she was quoted as saying, adding that that would be a threat to "American and Israeli interests".

Egypt insists the NGO case is a judicial matter and that all NGOs, regardless of origin, must heed Egyptian law.

But the timing of the statements release is as telling as its contents, coming just days after Egypts military ruler appeared to try to contain the tension that now threatens $1.3 billion in annual U.S. military aid to Cairo.

UNDERSTOOD SERIOUSNESS

General Martin Dempsey, the top U.S. military officer as chairman of the Joint Chiefs of Staff, told a U.S. Senate hearing on Tuesday he had tried to convince Egypts ruling generals of the gravity of the case.

"I spent about a day and a half in conversation with them encouraging them in the strongest possible terms to resolve this so that our mil-to-mil (military-to-military) relationship could continue," Dempsey told the Senate Armed Services Committee.

"Im convinced, potentially they were underestimating the impact of this on our relationship. When I left there, there was no doubt that they understood the seriousness of it," Dempsey said of his visit to Cairo over the weekend.

The spat is one of the worst in more than 30 years of close U.S.-Egyptian ties and has complicated Washingtons efforts to establish relations with the military council that took power from Mubarak after his overthrow in a popular revolt a year ago.

U.S. officials have called for the travel ban to be lifted, and members of the U.S. Congress have warned the dispute could endanger aid to Egypt.

The Senate Foreign Relations Committee on Tuesday voted to urge Egypt to "immediately cease its intimidation and prosecution" of democracy activists. The panels chairman, Senator John Kerry, a Democrat, said lawmakers were "sending a signal that American patience is being tested" in Egypt.

"We cannot continue to give aid to a country that is detaining illegally our U.S. citizens," Senator Rand Paul, a Republican, said in a separate speech on the Senate floor.

While the White House announced plans on Monday to keep aid to Egypt level with that of recent years, a State Department spokeswoman said that "if we cannot resolve the current impasse it could have implications for this relationship and for our ability to disburse this money."

Dempsey said he was opposed to proposed legislation in Congress that would break off military relations and cut off aid. "My personal military judgment is that would be a mistake," he said.

Senator John McCain, the top Republican on the panel, assured Dempsey he was seeking ways to avoid Congress adopting the legislation. But he said he hoped Egyptian officials understood the situation was unacceptable to the United States.

"Our relationship with Egypt is vital, but the fact is that the welfare of our citizens (is) even more vital," McCain said.

ACCUSATIONS

Nineteen U.S. citizens are among 43 foreign and local activists barred from leaving Egypt because of the investigation. An undisclosed number of U.S. citizens have sought shelter in the U.S. Embassy.

Accusations against the activists include working for organizations not properly registered in Egypt and receiving foreign funds illegally.

The NGOs involved say they sought to register with the authorities but their requests were not followed up. Many point out that they have operated openly in Egypt for years.

The U.S. State Department said its lawyers in Cairo were translating and reviewing a copy of the formal charge sheet detailing the accusations against NGO staffers, including the Americans subject to the travel ban.

"However the chief judge has not yet assigned the case to a criminal court, nor has any trial date been set," said State Department spokeswoman Victoria Nuland.

"So in this period we are continuing to work as hard as we can with the Egyptian government to work our way through this, and we continue to insist that our people have done nothing wrong and that they ought to be allowed to come home," she said.

In her remarks to investigators, Abul Naga detailed her doubts about the work of organizations involved, including the National Democratic Institute and the International Republican Institute, both loosely linked to the two main U.S. political parties.

She said U.S. funding to civil society groups in Egypt had shot up following the uprising against Mubarak.

"Civil society forms a vital part of any democratic society," said a Western diplomat. "Demonizing the sector in this manner is deeply unhelpful and adds to the growing anti-foreigner discourse which risks damaging Egypts international standing and reputation."

Mustapha Kamel Al-Sayyid, a political analyst, saw the latest coverage of the NGO story as an escalation. "I dont know if it is intended or it reflects a state of confusion in the conduct of domestic and foreign policies in Egypt," he said.