Two Israeli soldiers were injured and two militants inside Lebanon were believed killed in heavy exchanges of fire across the border between the two countries yesterday.
The fighting, which began after a Katyusha rocket attack in the early hours on an Israel Defence Forces (IDF) base near the town of Safed in the north of Israel, is the first since early February. The exchanges ceased last night after the intervention of UN peacekeepers.
Israeli forces used artillery and air power to bombard Hizbollah bases in southern Lebanon after the guerrilla group opened fire with machine-guns and mortars on northern Israeli communities and military posts, injuring a soldier from an anti-aircraft unit.
As the Israeli army advised residents in northern Israeli communities to take refuge in shelters, Hizbollah said one of its fighters had been killed in the afternoon bombardment.
Earlier, the Popular Liberation Front of Palestine-General Command (PFLP-GC) said that one of its militants was killed in an Israeli Air Force attack on its base in Luci in the Western Bekaa Valley. The IDF also struck at a PFLP-GC bunker at Nema'a, near Beirut.
Ehud Olmert, Israel's Prime Minister, said that the Israeli response after the morning rocket attacks was a "serious warning to Palestinian elements in Lebanon, of what will happen if the shooting continues." He added: "Let there be no doubt that we will deal a very painful blow to whoever tries to disrupt life along our northern border. They will receive an unequivocal and very aggressive response without hesitation if they don't stop."
Anwar Raja, the PFLP-GC representative in Lebanon, said: "Israel used the rockets that were fired into northern Israel as a pretext to assault Lebanese sovereignty. This reveals the dangers that the Lebanese and Palestinians face from Israel."
As the IDF issued a statement holding the government of Lebanon responsible for failing to prevent the attacks, Mark Regev, the Israeli foreign ministry spokesman, said: "We have instructed our delegation at the UN to present a formal complaint against Lebanon to the president of the Security Council."
Meanwhile, Egypt and Israel announced that Mr Olmert would meet the Egyptian President, Hosni Mubarak, in the Red Sea resort of Sharm el-Sheikh next Sunday. The two men will discuss Mr Olmert's plan to withdraw unilaterally from parts of the West Bank.
Sunday marks the deadline by which Mahmoud Abbas, the Palestinian President, has pledged to call a July referendum if Hamas fails to agree on a document envisaging a two-state solution to the conflict. The talks between Egypt and Israel are the next in a round of meetings Mr Olmert will hold in the coming weeks, including a visit to Britain and France next month.
Suleiman Awad, spokesman for the Egyptian President, said in Cairo that Mr Olmert and Mr Mubarak will "explore ways to move peace efforts in preparation for a three-way summit attended by Palestinian President Mahmoud Abbas." He gave no date for the trilateral meeting.
Meanwhile, Mr Abbas was said by officials to be holding to the 10-day deadline for Hamas agreement, despite a delay in the "national dialogue" intended to discuss the two-state document produced by a group of Hamas and Fatah prisoners in the Israeli jail of Hadarim. There have been conflicting signals from Hamas about their willingness to agree the document.
* Ariel Sharon, who has been in a coma for nearly five months, was moved to a long-term care facility on Sunday, a sign that the former Prime Minister's medical team does not believe he will awaken. AP