Israel has been operating inside the Gaza Strip for three weeks since June 28, when troops rolled back into the territory in a bid to retrieve a soldier abducted by militants and halt rocket attacks.

The death toll

At least 87 Palestinians and one Israeli soldier have been killed since the offensive began.

A two-day Israeli incursion into the sprawling northern town of Beit Hanun, the deepest offensive during the ground operation, ended overnight as troops withdrew to the land north and east of the town, Palestinian sources said.

Moshe Kaplinsky, Israel's deputy armed forces chief, said the so-called Summer Rain offensive would continue and that "other forces would take over from those who left Beit Hanun."

Captured soldiers are 'alive'

He said Corporal Gilad Shalit, whose capture on June 25 sparked the offensive, and two other servicemen snatched by Hezbollah guerrillas last Wednesday were "alive" and that "we know where they are being held".

As morning came to Beit Hanun, where eight Palestinians have been killed by Israeli fire since Sunday, Sofian Hamed, the director general of the Hamas-run municipality, said ten houses had been destroyed in the incursion.

Several other homes were damaged, as well as roads, water and sewage systems and electricity installations, he said.

A Palestinian security source said the Israeli troops had pulled back towards the border east and north of Beit Hanun.

"Now they're killing people twice, when we are living and when we're dead," said Mohammed Ibrahim, attending to his sister's grave in the Beit Hanun cemetery, partially destroyed in the offensive.

An army spokesperson confirmed that ground troops were still based in the northern Gaza Strip as well as in Dahaniya, in the south of the territory.

She said Palestinian militants fired two rockets into southern Israel on Tuesday, one of which lightly wounded a Thai worker.

Israeli Prime Minister Ehud Olmert has vowed to fight the Palestinians until "terrorism" stops, having opened up a second front against Hezbollah in Lebanon.

"We will fight the Palestinians without fail until terrorism stops, until Corporal Gilad Shalit is returned safe and sound, and Qassam rocket fire ceases," he told parliament.

Self-defence

"We will not cease our operations. In both cases, in Lebanon and in the Gaza Strip, this is an act of self-defence, because the nation is at a moment of truth," added the premier, who is facing the biggest test of his leadership.

Israel has bombed the Gaza foreign ministry twice, demolishing the building and tightening the noose on the Hamas-led government after earlier attacks on the offices of premier Ismail Haniya and interior minister Siad Siam.

Haniya said Israeli attacks on ministries "prove these actions are to paralyse the work of the Palestinian government and to destroy the foundations of the Palestinian political system".

Shalit's capture sparked the worst Israeli-Palestinian crisis since the Hamas-led government was elected in January polls and some of the deadliest fighting in the Palestinian territories for years.

Aid groups have repeatedly expressed concern about providing assistance to 1.4 million people living in Gaza following months of financial crisis and the suspension of direct Western aid to the Hamas-led government.

AFP