Hosni Mubarak also told Arabic channel Al Arabiya on Saturday that many in the large Shia Muslim populations of Arab states around Iraq were more loyal to Iran than to their own countries.
Asked what effect an immediate US troop withdrawal would have, he said: "Now? It would be a disaster... It would become an arena for a brutal civil war and then terrorist operations would flare up not just in Iraq, but in very many places.
"It's not on the threshold [of civil war]. It's pretty much started. There are Sunnis, Shia, Kurds and those types which come from Asia."
"I do not know when the situation in Iraq will stabilise. I personally do not see a solution to the problem in Iraq, which is practically destroyed now."
"It's not on the threshold [of civil war]. It's pretty much started"
He blamed ousted president Saddam Hussein for the mess.
"If Saddam was more just, none of this would have happened."
Receiving about $2 billion a year, Egypt is the largest recipient of US foreign aid after Israel and Iraq.
Loyalty to Iran
Mubarak said Iran exerted strong influence over Iraq's majority Shia population and Shia living in other Arab countries.
"Naturally Iran has an influence over Shia who make up 65% of Iraq's population."
Iraq's top Shia political parties, the Supreme Council for the Islamic Revolution in Iraq and Dawa, were based in Iran before the fall of Saddam in 2003.
Since US-led forces overthrew Saddam in the 2003 invasion, the Shia majority has emerged as the largest political force in Iraq, disturbing the old status quo of Sunni domination in the Arab world.
Mubarak said of the Arab countries around Iraq: "There are Shia in all of those states in very big percentages, and the loyalty of those Shia is to Iran, most of them are loyal to Iran. Their loyalty is not to their particular countries."
Kuwait, Bahrain and Saudi Arabia have large Shia communities but community leaders there deny they have any loyalty to any other country.
"Naturally Iran has an influence over Shia who make up 65% of Iraq's population"
Mubarak also dismissed the idea of sending Arab troops to Iraq in place of US and allied forces, saying Iraqis had made clear that they did not want to be controlled by foreigners.
On the Israeli-Palestinian conflict, the Egyptian leader denied asking Hamas to recognise Israel but said he would work with both the new Palestinian and Israeli governments to help resume peace negotiations.
Mubarak said he believed progress could be made with both sides to improve the livelihood of Palestinians.
Asked about a report in Asharq al-Awsat newspaper that Omar Suleiman, the Egyptian intelligence chief, had urged Hamas to recognise the Jewish state, Mubarak said: "Neither Omar Suleiman nor anybody else can ask Hamas to recognise Israel."