Israel holds off immediate Gaza response -source

JERUSALEM, June 25 (Reuters) Israeli leaders today decided to hold off launching a military response to a raid from Gaza that killed two soldiers, saying they would wait two days to see if militants free a third soldier who was abducted, an Israeli political source said.

Israel's decision-making inner cabinet headed by Prime Minister Ehud Olmert approved a list of steps and ordered the army to draw up plans for a ''harsh response'' to today's incursion.

But the ministers also agreed in the closed door session that the timing of any strikes would be decided at a later time, the source said.

''The army was ordered to prepare for the action,'' while Olmert and Defence Minister Amir Peretz would give the go ahead at a time of their choosing, he said.

''The effort would now focus on releasing the kidnapped soldier, but there would be military action if he is not released in two days,'' the source added.

Israel would meanwhile work through diplomatic channels to free the soldier, he said.

REUTERS KD KN2350