Israel: Prime Minister Ehud Olmert said Israel will press forward in its fight against militants as troops edged into parts of Gaza City.

Israel is nearing the goals it set for itself, but more effort, determination and patience is needed, Olmert said in remarks to the Cabinet published by his office. We must not, at the last minute, lose what has been achieved.

Olmert spoke after Khaled Mashaal, the Damascus, Syria- based Hamas leader, said the militant Islamic group will keep fighting. The head of Israel's Shin Bet and military intelligence agencies said the 16-day assault has degraded Hamas's ability to fire rockets at the south of the country.

Israeli troops, who had been holding positions outside Gaza City, pushed into its southern neighborhoods today and killed at least 12 gunmen, Palestinian witnesses said. Israel started bombing Gaza on Dec. 27 and sent in ground troops a week later with the declared purpose of stopping the barrage of rockets from Gaza.

The number of rockets fired has been cut to about 20 a day from more than 70 before the war, Cabinet Secretary Oved Yehezkel told reporters. About 500 rockets and 200 mortar shells have been fired since the start of the operation, Yehezkel said.

Hamas is in deep distress and its leaders are eager to reach a cease-fire because of the harsh blow they have sustained, Yehezkel said at a Jerusalem press conference, citing a briefing the intelligence chiefs gave to the Cabinet.

Hiding Deep

Hamas militants prefer not to confront our forces and are hiding deep in the urban areas, Yehezkel said, citing Maj. Gen. Amos Yadlin, the head of military intelligence, adding that the group is unlikely to raise a white flag.

Military operations have disrupted the group's ability to smuggle weapons into Gaza, but we don't delude ourselves about their ability to renew the smuggling, Yehezkel said.

Israeli troops killed several gunmen early today and the air force hit more than 60 targets, including a mosque used to store weapons, the army said in an e-mailed statement. At least 12 gunmen were killed as the troops entered the southwestern Gaza City neighborhoods of Tal al Hawa and Sheikh Ejlein, said Muawia Hassanein, chief of Palestinian emergency medical services.

Casualty Toll

The Israeli offensive has killed 887 Palestinians and wounded at least 3,600,about half of them civilians, according to Gaza hospital officials. Thirteen Israelis have died, nine in the fighting in Gaza and four in rocket attacks.

Mashaal said in Damascus that his group will not accept any negotiations for a cease-fire while we are under fire. Let Israel withdraw first and our people live rightfully without a siege and with open crossings.

Hamas seeks the lifting of the blockade Israel imposed on Gaza after the Islamic militant group seized control of the seaside strip in June 2007 and ended a partnership government with Palestinian Authority Mahmoud Abbas of Fatah.

Egyptian Foreign Minister Aboul Gheit yesterday denied that weapons are being smuggled from Egypt at a press conference in Cairo. Mashaal said Hamas wont accept any discussion about restricting its possession of weapons.

No one has the right to limit the right of our people to look for a rifle to defend ourselves, he said.

A French-Egyptian proposal calls for an immediate cease- fire with the opening of safe corridors for relief into Gaza and invites both sides to discuss steps including securing the borders and lifting an economic blockade.

Hamas Rejection

Amos Gilad, the Israeli official involved in truce talks, played down Mashaal's rejection of the truce proposal. The extremist declarations from Damascus come from those who feel safe and immune to attack. I am not sure that the leadership in Gaza feels the same way.

Twenty rockets were fired into southern Israel today, the same as yesterday, according to the army. That is down from a peak of 76 on the offensive first day. Israel says more than 3,200 rockets and mortar shells were fired at its territory from Gaza between the beginning of 2008 and the start of the current war. Hamas refuses to recognize Israel or any peace agreements with it.

As the fighting continues, international aid groups are warning of a humanitarian crisis, with shortages of food, water and medicines in the impoverished Gaza Strip, where about 1.5 million people live in an area of 360 square kilometers.

Aid Shipments

The UN resumed aid distribution after working out a security arrangement with Israel to assure the safety of its drivers. One driver working for the UN Relief and Works Agency for Palestine Refugees was killed and two were injured on Jan. 8. The UN said that Israeli gunfire killed the driver. Israel says it's still investigating the incident.

For the past four days, Israeli forces have been observing a three-hour truce so humanitarian aid can be distributed.

Since Israel began bombing Gaza Dec. 27,its benchmark stock index, the TA-25 Index, has gained 9 percent. Government bonds have dropped 1.1 percent, while the shekel fell 0.3 percent against the dollar.
Source : Bloomberg