They said the zone would be much smaller than the strip of southern Lebanon roughly 15 miles deep that Israel occupied for nearly two decades before withdrawing in 2000.

As the war between Israel and Hezbollah continued, four unarmed United Nations observers were killed when an Israeli airstrike hit their observation post near the Israeli border, United Nations and Lebanese officials said. The Israeli Foreign Ministry said that Israel "regrets the tragic death" of the observers, and that it would investigate thoroughly.

The timetable and makeup of an international force remained vague, despite diplomacy by Secretary of State Condoleezza Rice on her second day of a trip to the region. Ms. Rice, who met with Israeli and Palestinian officials after a surprise trip to Beirut on Monday, secured commitments from Israel to allow relief aid into Lebanon, and said she would press Israel to ease border restrictions for Palestinians.

But she left without any sign of a quick end to Israel's military campaigns in Lebanon or the Gaza Strip.

The United Nations secretary general, Kofi Annan, in Rome for talks on the Middle East scheduled to start Wednesday, issued a statement saying that he was "shocked and deeply distressed by the apparently deliberate targeting" of the United Nations post by the Israeli military. He said the post, at Khiam, was clearly marked, and called on the Israeli government to conduct a full investigation. The official New China News Agency said one of the dead was a Chinese observer.

Elsewhere in southern Lebanon, in fighting over the two Hezbollah strongholds of Bint Jbail and Marun al Ras, Israel said it had killed the Hezbollah leader in the area, Abu Jaafer, and 20 to 30 Hezbollah fighters in a 24-hour period. At least six people were killed in two neighboring houses in a predawn raid on the southern town of Nabatiye.

Hezbollah continued to strike at Israel, firing nearly 100 rockets as of Tuesday night, the Israeli military said. The group's leader, Sheik Hassan Nasrallah, threatened missile strikes "beyond Haifa." Hezbollah is believed to have missiles able to reach Tel Aviv.

Another Hezbollah leader, Mahmoud Komati, deputy chief of the group's political arm, told The Associated Press that Hezbollah was surprised by the force of Israel's reaction to its capture of two Israeli soldiers. He said Hezbollah had expected "the usual, limited" response such as commando raids or limited attacks on Hezbollah strongholds.

Israel's defense minister, Amir Peretz, said Israel's plan for a buffer zone inside Lebanon was being worked out and did not provide details. "We will have to build a new security strip, a security strip that will be a cover for our forces until international forces arrive," he said.

"We are shaping it, but you can't draw a single line that will become a permanent line along the entire zone," Mr. Peretz said on Israeli radio. "Unless there is a multinational force that will enter and take control, a multinational force with the ability to act, we will continue to fire against anyone who enters the designated strip."

Israeli officials, mindful of the Israeli public's reluctance to repeat its long occupation of southern Lebanon, say they do not plan a major ground invasion, and do not intend to hold large areas of territory for extended periods. Israeli leaders say they want the Lebanese Army to assume control of the border eventually.

Israeli troops do not yet have control over the border strip. A senior government official said Israeli forces intended to clear out Hezbollah strongholds in border villages as the military is already doing in Bint Jbail and Marun al Ras.

The military plans to move into other villages as well, but "this will not be the re-establishment of the old security zone," said the official, who spoke on condition of anonymity because he was not authorized to speak publicly on the matter. "It is not remotely similar."

[Confirming the death of its United Nations observer, the Chinese Foreign Ministry said Israel's ambassador to Beijing was summoned Wednesday and asked to convey China's request that Israel fully investigate the incident and issue an apology to the victim's relatives, The Associated Press reported. "We are deeply shocked by this incident and strongly condemn it," the ministry said in a statement.

[The victims included observers from Austria, Canada and Finland, United Nations and Lebanese military officials said,

[Israel's ambassador to the United Nations, Dan Gillerman, expressed "deep regret" for the deaths and denied the post was intentionally targeted, saying he was "deeply distressed" by Mr. Annan's assertion, which he called "premature and erroneous," The A.P. said.]

Ms. Rice, meanwhile, won a promise from Prime Minister Ehud Olmert of Israel to allow relief flights into Beirut International Airport, where the runways have been bombed by Israel. Ms. Rice also told the Palestinian Authority president, Mahmoud Abbas, that she would press Israel to ease border restrictions for Palestinians.

Ms. Rice received a warm welcome from Mr. Olmert in Jerusalem, in contrast to the much cooler receptions she received in the West Bank city of Ramallah, and in Beirut on Monday.

But her visit to the West Bank had echoes of her surprise stop in Beirut. In both cases, she assured a largely powerless leader that the United States was sympathetic to the suffering of his people, though American leaders have stopped short of pressuring Israel to let up on its campaign against militants.

Ms. Rice pointedly characterized Mr. Abbas as the "duly elected president" of the Palestinian Authority, and said "the Palestinian people have had to live too long" under harsh conditions.

But just as pointedly, she did not respond to Mr. Abbas's urgent appeal for cease-fires in region, to ease what he said was suffering "beyond the capacity of any human being to endure."

Ms. Rice and Mr. Abbas discussed the release of an Israeli soldier who was seized by Palestinian militants on June 25, setting off the current crisis in Gaza. But Mr. Abbas is seen as having little influence.

Hamas, which holds the Palestinian prime minister's post and controls the cabinet, is demanding an exchange for a large number of Palestinian prisoners. Hamas militants were one of three factions that claimed responsibility for seizing the soldier.

In Ramallah, just as in Beirut, demonstrators protested Ms. Rice's visit. About 250 turned out, with some carrying signs that said in Arabic and English, "Rice, Go Home."

With the Beirut airport closed, even Prime Minister Fouad Siniora of Lebanon had to make special arrangements to travel abroad. He boarded a United Nations helicopter near a conference center north of Beirut that took him to Cyprus. He was heading to Rome for the international conference, which Ms. Rice will also attend.

The Lebanese government has now adopted four Hezbollah conditions for a settlement as its own: giving the small disputed slice of border territory known as Shabaa Farms to Lebanon, returning three Lebanese prisoners held by Israel, ending Israeli flyovers into Lebanese airspace, and providing a map showing the location of Israeli land mines in southern Lebanon.

The issue of Shabaa Farms has been the public rationale for allowing Hezbollah, alone among civil war-era militias, to keep its weapons. It was, Lebanese officials have said, resisting continued Israeli occupation.

As the fighting continued, the Israeli military said its aerial attacks included bombing a Hezbollah rocket launching site near the southern city of Tyre, and hitting 10 buildings used by Hezbollah in southern Beirut.

In Mughar, in northern Israel, a 15-year-old Israeli Arab girl died in a Hezbollah rocket strike, family members said. Three other family members were wounded.

Israel also struck in Gaza, with the air force bombing three buildings used for making and storing weapons, according to the Israeli military.

A Palestinian teenager was shot and killed by Israeli troops near Gaza's border fence, Palestinian hospital officials said. The Israeli military said it had fired at people who had planted a bomb.

Palestinian militants fired several rockets into southern Israel on Tuesday, the Israeli military said.

[Agence France-Presse reported that seven Palestinians were killed in an Israeli air raid on a group of people in the east of Gaza City on Wednesday, according to Palestinian hospital officials. That strike followed three Israeli air raids in the Gaza Strip that killed one Palestinian and wounded several more, the news agency said.]

Ms. Rice and other administration officials have repeatedly blamed Hezbollah for starting the crisis in Lebanon with a raid into Israel on July 12 that resulted in the deaths of three Israeli soldiers and the capture of two more who were taken into Lebanon. While strongly supporting Israel, the Bush administration does not want to see the democratically elected Lebanese government harmed by the current conflict.

"I have no doubt there are those who wish to strangle a democratic and sovereign Lebanon in its crib," Ms. Rice said. "We, of course, also urgently want to end the violence."

Saudi Arabia pledged a financial package of $1.5 billion to aid the Lebanese economy and help rebuild the country, the official Saudi news agency reported.

International support is building for a multinational force in southern Lebanon, but many issues are unclear. An American official traveling with Ms. Rice said he believed that those matters would be worked out.

"I think you will hear about the impossibility of deploying an international force until the day it is deployed," the official told reporters, speaking on condition of anonymity because he was not authorized to speak publicly on the issue. "But there will be an international force, because all the key players want it."

In Rome on Wednesday, Ms. Rice is expected to talk with Arab and European officials about the makeup and mandate of such a force.

France is perhaps the most likely European country to contribute troops, given its history with Lebanon. France administered Lebanon as a protectorate from 1920 to 1943, and the former Lebanese prime minister, Rafik Hariri, who was killed in a car bombing last year that many believe was linked to Syria, was a close friend of the French president, Jacques Chirac.

But France is resisting the American idea of moving a force in quickly, insisting on a cease-fire first, followed by a political agreement between Israel and Lebanon that would also be accepted by Hezbollah, said Jean-Baptiste Mattéi, the French Foreign Ministry spokesman.

Greg Myre reported from Jerusalem for this article, and Helene Cooper from Ramallah, West Bank, and Rome. Jad Mouawad contributed reporting from Beirut, and Elaine Sciolino from Paris.

The ambulanceman gave Ali the job of keeping his mother alive. The 12-year-old did what he could. "Mama, mama, don't go to sleep," he sobbed, gently patting her face beneath her chin. Behind her black veil, her eyelids were slowly sinking. "I'm going to die," she sighed. "Don't say that, mama," Ali begged, and then slid to the ground in tears.

On the pavement around mother and son were the other members of the Sha'ita family, their faces spattered with each other's blood. All were in varying shades of shock and injury. A tourniquet was tied on Ali's mother's arm. A few metres away, his aunt lay motionless, the white T-shirt beneath her abaya stained red. Two sisters hugged each other and wept, oblivious to the medics tending their wounds. "Let them take me, let them take me," one screamed.

Their mother was placed on a stretcher, and lifted into the ambulance. "God is with you, mama," Ali said. She reached up with her good arm to caress his face.

The Sha'itas had thought they were on the road to safety when they set out yesterday, leaving behind a village which because of an accident of geography - it is five miles from the Israeli border - had seemed to make their home a killing ground. They had been ordered to evacuate by the Israelis.

But they were a little too slow and became separated from the other vehicles fleeing the Israeli air offensive in south Lebanon. Minutes before the Guardian's car arrived, trailing a Red Cross ambulance on its way to other civilian wounded in another town, an Israeli missile pierced the roof of the Sha'itas' white van. Three passengers sitting in the third row were killed instantly, including Ali's grandmother. Sixteen other passengers were wounded. In recent days, families like the Sha'itas are bearing the brunt of Israel's air campaign and its efforts to rid the area of civilians before ground operations. A day after Israel's deadline for people to leave their homes and flee north of the Litani river, roads which in ordinary times wind lazily through tobacco fields and banana groves have been turned into highways of death.

Plumes of smoke rise in the distance, and the road in front of us offers up signs of closer peril: car wrecks, still smoking after Israeli strikes, and abandoned vehicles with shattered rear windows. Some were direct hits by Israeli aircraft. Others were drivers who had lost control. Overhead is the menacing roar of Israeli warplanes and the buzz of drones tracking every movement.

With bridges on the main coastal roads severed by Israeli air strikes, and secondary mountain routes scarred by craters, the means of escape for Lebanese trying to follow Israel's orders are limited. "All the smaller roads leading to the coastal roads are destroyed," said a spokesman for the UN in the border town of Naqoura. "In some areas you have people pushing cars by hand through obstacles made by a rocket or a bomb." By yesterday afternoon, for many villagers, there was truly no way out.

Death came crashing into the Sha'ita family soon after 10am, in the form of an Israeli anti-tank missile, seemingly fired from an Israeli helicopter high overhead, in Kafra, about nine miles from their home. Those passengers who were not killed or injured by shards of burning metal were hurt when the van plunged into the side of a hill.

In their village of et-Tiri, the Sha'itas were an extended clan of 54 people. Between them they had three cars. When the Israeli evacuation order came, in leaflets shot out of aircraft, the family planned at first to stay. "We were at home living our lives," said Musbah Sha'ita, Ali's uncle.

By 7pm on Saturday night, the deadline set by Israel for people in about a dozen villages in south Lebanon to leave, the Sha'itas were close to panic. "Whoever could run was running," said Mr Sha'ita. "I pushed them to go."

One of their fleeing neighbours said he would send transport for them, and the next morning all 54 of the Sha'itas set out in a convoy of three white minivans. That choice of transport proved a fatal mistake.

In their leaflet campaign, the Israelis have warned repeatedly they would consider minivans, trucks and motorcyles as targets. "The minivans are a target for Israel because they can take Katyusha rockets for Hizbullah, so they do not contemplate too long," the UN official said. "They just shoot it."

Dozens of others have met a similar fate as Israeli F-16 jet fighters and attack helicopters intensify a campaign meant to cut off the supply of Hizbullah rockets, and the movement of its fighters.

But Israel's offensive is being felt across a much wider swath of south Lebanon. The Lebanese Red Cross in Tyre said 10 cars carrying civilians and three or four motorcycles had been hit by Israeli missiles yesterday. Red Cross ambulances were no safer; a spokesman said an ambulance had narrowly escaped a missile near the village of el-Qlaile, south of the city. A number of the dead, including the three members of the Sha'ita family, remained trapped in their cars because it was too dangerous to retrieve their bodies.

In Tyre, south Lebanon's main town and a stopping point on the flight to the north, the hospital received a steady flow of injured. By late afternoon there were three dead and 41 injured, two critically."They are bombing them all in their cars," said Ahmed Mrowe, the director of Jabal al-Amal hospital.

Those who choose not to flee - the UN estimates that 35%-40% of villagers are too poor or too frail to make the journey - are being left stranded.

That was the predicament facing the Sha'itas when Musbah Sha'ita urged them to flee. In a car on the way to the hospital, his ear was welded to his phone, trying to find out where his wounded relatives were, and he could not stop blaming himself.

"We put a white flag. We were doing what Israel told us to do," he says. "What more do they want of us?"

Mr Howells, whose weekend remarks in Beirut and here yesterday appeared to reflect an emerging difference - at the very least in tone - between the UK and US governments over Israel's conduct of the war, repeated that Israel had to "think very hard" about the loss of civilian life and the impact on Lebanon's infrastructure. The minister was speaking after touring the main Rambam hospital in Haifa where two men - including an Arab carpentry worker - were killed yesterday in repeated volleys of around 80 Katyusha rockets which Hizbollah fired throughout the day on northern Israel.

Asked if he was saying that that Israel's bombardment, which has taken over 370 lives, was not "proportionate and restrained", Mr Howells said: "Yes, I believe that is the view of the British government. We defend all the all the way down the line Israel's right to defend its citizens, cities and communities against Hizbollah, a ruthless enemy, but there is also a politicial battle to be won, and they have got to show proprtionality."

Mr Howells said that Israel knew that "it's not enough to see a military victory. It has to win a wider politicial battles as well." That meant it had to consider the consqeunces of its conduct in Lebanon " including the children that are dying". In an earlier interview with Sky News he repeated that he hoped the US was aware of the impact of the bombardment of Lebanon and repeated that it did not consist of " surgical strikes."

But on the eve of a preliminary visit to Jerusalem today by the US Secretary of State Condoleeza Rice, Mr Howells stopped short of calling for an immediate ceasefire. Israeli officials confirmed the government believes that it has informal approval from the Bush admininstration to continue its assault on Lebanon - both from the air and in a series of ground incursions across the border - for at least another week.

After visiting Israel Ms Rice will fly to Rome for meetings with delegates from the UN and from Arab states and to an international conference in Malaysia before returning to Israel next week. Reportedly high on the agenda on her round of diplomacy this week will be the difficult task of assembling some form of putative multinational force to secure the border areas in southern Lebanon after any ceasefire, if one is negotiated.

Mr Howells said yesterday that he doubted that the UK - heavily stretched as it is in Afghanistan as well as Iraq - would contrbute to any such force, and emphasised that such a force would need the assent of the Lebanese government and not be a "post-colonialist" military force imposed on the Lebanese people.

Habib Awad, 48, the Arab Israeli who was killed in yesterday's Katyusha attack was the third Arab - out of a total of 17 Israeli citizens - to die in rocket attacks. He was just outside the secure room of the carpentry shop where he had worked for 20 years when the rocket struck. Another Haifa man was killed by shrapnel as he drove his car along a main road.

Mr Howells' criticisms drew a sharp rebuke from Israel yesterday. Mark Regev, a Foreign Ministry spokesman, said: "Under very difficult circumstances, Israel is being as surgical as is possible. We are trying to neutralise a very formidable military machine. We put time and effort into urging civilians to vacate the areas of the fighting because we don't want to see civilian casualties. But on the other hand, the Hizbollah military infrastructure continues to bombard Israeli cities with missile after missile. We have to act to neutralise that threat."

The spokesman rejected United Nations claims that its offensive threatened a humanitarian disaster. "We are working closely with the international community to try to facilitate the delivery of medicines and foods and to allow foreign nationals to leave. The Lebanese people are not our enemies. We are working together with the international community to facilitate humanitarian support in this crisis."

Israel seemed to be softening its opposition to an international force in Southern Lebanon, so long as it had a mandate and the necessary teeth to implement Security Council resolution 1559, which calls for disarming Hizbollah and the stationing of Lebanese army troops in the border zone.

Amir Peretz, the Defence Minister, said: " Israel's goal is to see the Lebanese army deployed along the border with Israel, but we understand that we are talking about a weak army and that in the mid-term period Israel will have to accept a multinational force." He added that such a force should also act to prevent the smuggling of weapons from Syria into Lebanon.

Israeli forces captured two Hizbollah fighters yesterday during a battle in southern Lebanon, Israeli military officials said. The two men were the first prisoners Israeli forces had taken since the current offensive began.

At least four heavy blasts were heard in Beirut, the first Israeli strikes in the city in nearly two days. A gray cloud billowed up from the capital's southern district, a Hezbollah stronghold that has been heavily bombarded. Nearly daily pounding halted during Secretary of State Condoleezza Rice's visit Monday.

Al-Jazeera television said 20 Israeli rockets hit the Dahiyah neighborhood as a quick succession of blasts set off car alarms in central Beirut, miles away, and sirens were heard. More, smaller explosions followed.

Outlining the scope of the Israeli campaign for the first time, a senior army commander said Israel would only encircle Lebanese towns and villages near the border and did not plan a deeper push into the country.

"The intention is to deal with the Hezbollah infrastructure that is within reach," Col. Hemi Livni, who commands Israeli troops in the western sector of southern Lebanon, told Israel Army Radio, told Israel Army Radio. "That means in southern Lebanon, not going beyond that."

Rice, in Israel on the second leg of a Middle East tour, maintained the Bush administration's position that a cease-fire must come with conditions that make an enduring peace, saying the time has come for an urgent end to the violence hanging over the region.

"I have no doubt there are those who wish to strangle a democratic and sovereign Lebanon in its crib," Rice said before meeting with Israeli Prime Minister Ehud Olmert in Jerusalem. "We, of course, also urgently want to end the violence."

Olmert welcomed Rice warmly and vowed that "Israel is determined to carry on this fight against Hezbollah." He said his government "will not hesitate to take severe measures against those who are aiming thousands of rockets and missiles against innocent civilians for the sole purpose of killing them."

He later said Israel has the "stamina for a long struggle" and is determined to defeat the Islamic militant group.

With the diplomatic threads for a solution still tangled, the violence looked likely to drag on with a new element after 14 days of bombardment: tough ground fighting as Israeli forces try to move village to village near the border, facing well-armed, determined Islamic militant guerrillas who have been digging in for years.

The U.S., which is pushing for the deployment of international and Lebanese troops in southern Lebanon to stop Hezbollah attacks on Israel, has angered many allies with its support of Israel and resistance to calls for an immediate cease-fire to the hostilities that began with a July 12 Hezbollah attack that killed eight Israeli soldiers and captured two.

Arabs will insist on an immediate cease-fire and for the Lebanese government to take control over the militant Hezbollah at an international meeting to be held in Rome on Wednesday, Jordanian Foreign Minister Abdul-Illah al-Khatib said.

German Defense Minister Franz Josef Jung said a cease-fire must be in place before any international troops are sent to Lebanon. Israel has suggested it would accept an international force - preferably from NATO - to ensure the peace in southern Lebanon, but Jung said after meeting his French and Polish counterparts that it was too early to say if the alliance, or a European Union force, could be put in place.

A top Hamas official in Syria said Israeli soldiers held by Hamas and Hezbollah will only be released as part of a prisoner swap.

The official, Mohammad Nazal, also raised the possibility of teaming up with Hezbollah to negotiate terms that would lead to the release of Palestinian and Lebanese prisoners in Israel in exchange for the three Israeli soldiers - two held by Hezbollah and one by Hamas.

Hundreds of Americans and Russians, meanwhile, were feared stranded in the heart of Lebanon's war zone after a ship evacuating foreign nationals from the area left the hard-hit southern port of Tyre on Monday evening.

A German official involved in the effort, Erik Rattat, said 300 Americans were trapped southeast of the town, and U.S. officials said they did not know if any of them were able to reach the boat before it left. Moscow said more than 100 Russians and citizens of other ex-Soviet republics also might be trapped.

U.S. officials also said the last scheduled evacuations of Americans from Lebanon would happen Wednesday.

At the front Tuesday, an Israeli military official said troops had surrounded Bint Jbail, a town that has symbolic importance to Hezbollah as one of the centers of resistance to the Israeli occupation 1982-2000.

Israeli forces have seized some houses on the outskirts of the hilltop town since beginning the assault Monday, but do not yet control Bint Jbail, the official said, speaking on condition of anonymity as a press statement had not been issued.

Up to 200 Hezbollah guerrillas are believed to be defending the town, which lies about 2½ miles north of the Israeli border.

Hezbollah's Al-Manar TV reported the fighters were mounting a strong defense. "The resistance fighters are engaged in heroic confrontations with elite troops of the (Israeli) Golani Brigade, who are attempting to advance under heavy bombardment from the air and land," Al-Manar said.

In a pre-dawn raid, Israeli warplanes destroyed two neighboring houses in Nabatiyeh, which lies 16 miles north of Bint Jbail and has been heavily bombarded in the past few days.

In one house, a man and his wife and their son were killed, said the couple's daughter, Shireen Hamza, who survived. Three men died in the other house, she said.

While buried under the rubble for 15 minutes, "I just kept screaming, telling my parents to stay alive until help comes," she said. "My father kept saying to me in a weak voice, 'Shireen, stay awake. Don't sleep.'"

Security officials said seven people were killed in the blast. But Nabatiyeh Hospital received six bodies from the strike, said a doctor there, Marwan Ghandour.

At least 70 rockets were fired at northern Israel, and a teenage girl was killed and three other people were injured in the Arab town of Maghar.

One of the rockets fired at the Israeli port city of Haifa hit a bus, another hit a house and two reportedly struck close to a hospital, injuring five people, witnesses and doctors said. One man died of a heart attack while running toward a bomb shelter, Israel Radio said.

Rockets also hit the towns of Kiryat Shemona, Nahariya, Tiberias, Acre and Safed.

Israeli Vice Premier Shimon Peres appealed to the Lebanese people to disarm Hezbollah, and he spoke of seeing "the tough scenes from Lebanon, of your women and children fleeing these days on roads that lead to the unknown."

"As soon as the war ends, you will find in us what we really are, pursuers of peace, seekers of peace, seekers of hope," Peres said. "There is not any conflict between Israel and Lebanon."

He said the Israeli and Lebanese prime ministers could easily solve their countries' differences if they were to meet.

Israel's death toll in the conflict stands at 42, including 24 soldiers and 18 civilians, most killed by hundreds of rockets that have been fired by Hezbollah.

At least 391 people have been killed and 1,596 wounded in Lebanon, according to Lebanese security officials. Among them are 20 Lebanese soldiers and at least 11 Hezbollah guerrillas.

Israeli Brig. Gen. Udi also said Israel has destroyed 100-150 rocket launchers of all types, adding that he couldn't say how many of Hezbollah's approximately 12,000 rockets have been destroyed. He also said "dozens" of Hezbollah fighters have been killed.

Humanitarian efforts continued as aid workers rushed to deliver supplies to hard-hit areas, and Olmert said Israel will allow the opening of safe passages for the transport of humanitarian aid to all areas of Lebanon.

A team of Israeli military officials will meet with international military experts to outline the pathways, Olmert told Rice during their meeting, according to his office.

U.N. humanitarian chief Jan Egeland said earlier that an aid convoy could move from Beirut to southern Lebanon on Wednesday if the Israeli army gives final approval. Israel had previously only loosened its blockade of Lebanese ports to let aid ships into Beirut.

Egeland has issued an urgent appeal for $150 million in aid to Lebanon, where tens of thousands of refugees are in temporary shelters, supplies of medicine are tight at many hospitals and fuel is slowly running out.

King Abdullah of Saudi Arabia has decreed donations totaling $1.5 billion to Lebanon, assigning $500 million for its reconstruction and $1 billion to be deposited in Lebanon's central bank to support the economy.

In the first incident, a soldier from the Egoz unit was lightly wounded. A short while later, troops from the Golani anti-tank company that had take over a house in the town, spotted a Hezbollah cell nearby. In the ensuing exchange of fire, Hezbollah men were apparently hit. However, when air support was called in, an Israel Air Force aircraft mistakenly opened fire on IDF troops and lightly wounded five soldiers from the anti-tank company.

At this point, two advanced Merkava-4 tanks were brought in to evacuate the casualties, under the command of Lieutenant Colonel Guy of Battalion 52. The evacuation went smoothly, but on the way back, the troops were ambushed by Hezbollah. Two large explosive devices were detonated close to each other and anti-tank rockets were fired. The battalion commander's tank was hit by a rocket, moderately wounding him and killing the gunner. Two other soldiers were lightly wounded.

The second tank hit a large explosive device. The tank commander, an officer serving as platoon commander, was killed and three of his crew members were wounded. The tank may have veered from the planned course of travel, in open territory, and got onto the main route along the road leading from Bint Jbail to Maroun Ras, in order to complete the casualty evacuation quickly. Golani officers praised the conduct of the deputy armored battalion commander, who assumed command of the troops and remained calm under fire.

Throughout yesterday, soldiers from Egoz, the Golani reconnaissance battalion and Battalion 51 fought with Hezbollah at close range. The soldiers reported seeing five Hezbollah corpses in the field, but the IDF believes the real death toll to be much higher.

A senior officer from the IDF's Northern Command told Haaretz last night that the operation in Bint would continue over the next few days. Despite the casualties the IDF sustained, he said, the imbalance of power between the sides was clear. "There's an old soldiers' saying that when it rains, the enemy also gets wet. Today [yesterday] they got wetter," he added.

It also said that a cluster grenade attack on Wednesday killed one and wounded at least 12 civilians in the village of Blida.

"Cluster munitions are unacceptably inaccurate and unreliable weapons when used around civilians," Kenneth Roth, Human Rights Watch executive director, said in a statement.

"They should never be used in populated areas."

An Israeli army statement said: "The use of cluster munitions is legal under international law and the IDF [Israel Defence Forces] uses such munitions in accordance with international standards. We are checking the specific details of the incident mentioned in the report."

Violating a ban?

Human Rights Watch said it had photographed M483A1 artillery shells stored on the Israeli side of the border, which deliver 88 cluster sub-munitions per shell and have a failure rate of 14 per cent, often leaving behind dangerous unexploded shells.

It said it believed the use of cluster grenades in populated areas could violate a ban on indiscriminate attacks contained in international humanitarian law.

"Our research in Iraq and Kosovo shows that cluster munitions cannot be used in populated areas without huge loss of civilian life," Roth said.

"Israel must stop using cluster bombs in Lebanon at once."