Israel kills 2 Palestinians in Gaza, presses offensive

GAZA, Nov 5 (Reuters) Israeli forces shot dead two Palestinians including a policeman and kept up the shelling of militant targets in the northern Gaza Strip today, residents and medical officials said.

Prime Minister Ehud Olmert said Israel's assault on rocket-launching squads and gunmen would not be open-ended but declined to say when it would finish. He appeared to acknowledge the rocket threat could not be wiped out by the operation.

At least one homemade missile hit the Israeli border town of Sderot, the Zaka rescue service said. No one was hurt.

Israeli forces have killed 47 people in the five-day operation, one of the biggest since the army and Jewish settlers pulled out of Gaza last year after 38 years of occupation.

More than half of the fatalities in the current operation have been gunmen, Palestinian medical officials have said.

''We have no intention of conquering Gaza,'' Olmert said at the start of a cabinet meeting in Jerusalem.

''We have declared that we will never accept the ongoing (rocket) fire and that we would take any steps needed to considerably reduce the fire and prevent terror activity.'' The assault is mainly focused on the town of Beit Hanoun, home to 30,000 Palestinian and not far from the border.

It is part of a wider offensive launched in late June after militants including members of the governing Hamas movement abducted an Israeli soldier in a cross-border raid from Gaza.

Medical officials and police said Israeli troops shot dead the policeman near his post in northern Gaza. Israel's army said it was checking the report. A gunman belonging to the Hamas armed wing was shot in a clash with soldiers in Beit Hanoun.

Israeli analysts expect Olmert will end the operation before he heads to Washington for talks with President George W Bush, scheduled for November 13.

The United States has said Israel has the right to defend itself against rocket attacks.

But it has also pressed Israel to relax its curbs on Gaza's crossings to ease a humanitarian crisis in the strip, already suffering under a Western aid embargo imposed when Hamas refused to recognise Israel after taking office in March.

Since the start of the overall offensive in late June, 320 Palestinians have been killed, around half of them civilians, hospital officials and residents say. Three Israeli soldiers have been killed.

Militants have fired some 300 homemade missiles at Israel this year from Gaza, Israel says. They are rarely deadly.

UNITY GOVERNMENT The Israeli assault coincides with efforts by the Palestinians to form a unity government they hope will lead to a lifting of Western sanctions.

Mustafa Barghouthi, an independent lawmaker who has been mediating between Hamas leaders and rival President Mahmoud Abbas, said there could be an announcement within days on formation of a government to replace the Hamas administration.

''We are very close to finalising everything,'' Barghouthi told Reuters.

An earlier deal to form a unity government collapsed weeks ago, deepening a power struggle and raising fears of civil war.

Some Palestinian sources have said an agreement could see formation of a government of ''technocrats'' without direct affiliation to either faction.

The main stumbling block has been agreeing the new government's stance toward Israel.

Hamas says it will never acknowledge Israel. The moderate Abbas favours a two-state solution to end the conflict. It was unclear how the new government's platform would resolve this.

(Additional reporting by Wafa Amr in Ramallah) REUTERS SP BS1711