Haniyeh proposes ceasefire; Israel rebuffs offer

GAZA, July 8 (Reuters) Palestinian Prime Minister Ismail Haniyeh of Hamas today called for a ceasefire with Israel after 11 days of fierce Gaza fighting, but Israel said militants must first release a captured soldier and halt rocket attacks.

Israel's incursion into the Gaza Strip has killed more than 40 Palestinians and drawn international fire.

''To get out of the current crisis, it is necessary that all parties restore calm on the basis of mutually stopping all military operations,'' Haniyeh said in a statement hours after Israel withdrew its forces from most of northern Gaza.

Haniyeh said Israel's full withdrawal from the coastal strip, a halt to military actions and the reopening of key crossings would ''make it easy for us to end the crisis'' over Corporal Gilad Shalit, who was captured by militants in a cross-border raid on June 25.

Hamas's armed wing and other groups are demanding the release of Palestinian prisoners in exchange for the soldier.

They pulled out of Egyptian-led negotiations earlier this week when Israel ignored their deadline, but Haniyeh said those talks should resume.

Haniyeh is also demanding the release of eight Hamas cabinet ministers detained by Israel.

''We will not negotiate with hostage-takers,'' Israeli Foreign Ministry spokesman Mark Regev said.

Once Shalit is freed unconditionally and rocket fire is stopped, ''then we will be able to redeploy on our side of the border,'' Regev added.

Prime Minister Ehud Olmert has distanced himself from his own public security minister, Avi Dichter, who said Palestinian prisoners could be released at a later date as part of a ceasefire.

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