How should Egypt handle its protestors?

As protests in Egypt enter their third day, the Egyptian authorities continue to crackdown on anyone involved. News reports estimate that at least six people have been killed and 860 have been detained.
Twitter remains blocked and mobile phone networks have been disrupted.
US Secretary of State Hillary Clinton has called on Egypt to consider broad reforms. She asked President Mubarak to "take this opportunity to implement political, economic and social reforms that will answer the legitimate interests of the Egyptian people."
The French Foreign Minister, Michèle Alliot-Marie, said on Wednesday
I can only deplore that there were deaths, two among the demonstrators, one among the police. One must be able to demonstrate without there being violence, let alone deaths.
Italy's Foreign Minister Franco Frattini asked the President Mubarak "continue to rule his country with wisdom and foresight, as he has always done."
So how should the Egyptian government be reacting to the mass protests?
