Hamas rockets fall, Israel eyes escalation

GAZA, May 28 (Reuters) Hamas kept up rocket fire into Israel today in defiance of a ceasefire call by Palestinian President Mahmoud Abbas and Israeli threats to escalate military strikes in the Gaza Strip.

Seven rockets struck the town of Sderot in southern Israel but caused no casualties, the military said. Previous salvoes during an almost two-week-old surge of cross-border fighting have killed two Israelis - one a motorist hit yesterday.

Israel has struck back with an aerial bombing campaign that has killed more than 40 Palestinians in Gaza, most of them militants. Yet the failure to end the rocket barrages has prompted the Israeli government to speak of tougher action.

''I think the measures are effective but not enough, and we have a large battery of some more steps that I hope we will be able to take,'' Internal Security Minister Avi Dichter told Reuters during a visit to Sderot. He did not elaborate.

Israeli Prime Minister Ehud Olmert said yesterday that Hamas would be fought ''without limitation''. But having been rapped by a commission of inquiry for his handling of last year's costly Lebanon war, Olmert has resisted rightist calls for a major ground sweep of Hamas bastions in the congested Gaza Strip.

Abbas, who agreed a now-defunct Gaza truce with Olmert in November, has been trying to coax Hamas's armed wing and other militants into holding their fire again.

The Fatah leader was rebuffed yesterday by Hamas, which said Israel must agree to a comprehensive truce in Gaza and the occupied West Bank. Israel says it will continue West Bank raids against militant suspects.

Abbas's difficulties reflect his deeper challenges in sustaining a power-sharing deal with Islamist Hamas, which is shunned by the West for its refusal to make peace with Israel.

HAMAS THREATENS ''Our strikes against the enemy are continuing and we will chase the occupation's soldiers and settlers from every inch of Palestine,'' Hamas said in a statement claiming Monday's salvo.

Hamas refers to Gaza, the West Bank and Israel as Palestine.

The latest round of Israeli-Palestinian violence erupted as gunmen from Hamas and Abbas's more moderate Fatah traded fire in the streets of Gaza. The infighting has since largely died down.

Israel quit Gaza in 2005 in what it called a possible spur for peace talks. Hamas's ascendancy since, as well as setbacks in the July-August war against Lebanese Hezbollah guerrillas, has stoked Israeli dissatisfaction with the Olmert government.

Defence Minister Amir Peretz was widely expected to be voted out as head of the centre-left Labour party in an internal vote today. That could undermine Olmert's coalition.

''We hope Hamas understands we have no intention of compromising,'' Peretz told reporters while casting his ballot in Sderot, his hometown, a photo-op punctuated by rocket landings.

''We are continuing our democratic life,'' he said. ''There's an answer to terror: Israel is alive and breathing.'' Israel has hinted that it sees the current standoff as an opportunity to deliver a major blow to Hamas - even if a new Gaza truce is on offer.

''We need to be prepared for a long confrontation independent of the internal agreements of the Palestinians,'' an Israeli official quoted Olmert as telling his cabinet yesterday.

REUTERS GL VV1623