Israeli Prime Minister Ehud Olmert Wednesday expressed hope for an Egyptian-brokered truce with militant factions in Gaza, but threatened to use unprecedented military power if rocket attacks from the Strip did not stop.
He spoke after a rocket fired from northern Gaza penetrated the roof of a shopping mall in the southern Israeli coastal city of Ashkelon, striking a clinic on the top floor and injuring at least 16 Israelis, among them a mother and her toddler daughter. More than 60 others were treated for shock.
The strike came after clashes between Israeli troops and local militants in southern and northern Gaza left at least three Palestinian militants and a civilian dead. At least nine other Palestinians were wounded, medical officials said.
Calling the rocket strike on the shopping mall "intolerable and unacceptable," Olmert said Israel would "take the necessary steps so that this will stop."
The new eruption of violence in and from Gaza overshadowed the start Wednesday of a 48-hour visit to Israel by US President George W Bush, marking the 60th anniversary of the country's establishment on May 14, 1948.
Despite the violence in and from the Hamas-ruled Gaza Strip, peace negotiations with Palestinian President Mahmoud Abbas were making "serious progress," Olmert told Bush.
Addressing a conference in Jerusalem, celebrating Israel's 60th anniversary and attended by Bush as well as dozens of other leaders and dignitaries from around the world, Olmert said the negotiations "hopefully will come to fruition within this year, 2008."
"We are genuinely interested in meeting the time framework that we talked about in Annapolis," Olmert said earlier after meeting Bush.
The Israeli premier and Abbas agreed in the Maryland capital some five months ago to end a seven-year freeze in the peace process and strive for a peace deal before Bush leaves office in January 2009.
But the ongoing Gaza violence, as well as bitter arguments over Israel's refusal to stop building in a number of West Bank settlement blocks which it has vowed to keep under a future peace deal, have cast a dark shadow on the revived talks.
Palestinian officials have downplayed Israel's statements of progress in the negotiations.
"There is still a big gap between us and them regarding all final final status issues. We hope to bridge this gap," senior Palestinian negotiator Saeb Erekat told Voice of Palestine Radio Wednesday.
Erekat nevertheless called the negotiations "serious and in-depth" and said they dealt with all the core issues of the Israeli- Palestinian conflict "without any exception."
Olmert said Wednesday he wanted to reach an "understanding" that would deal with key issues, including Israel's and the future Palestinian state's final borders, security arrangements between the two states and the Palestinian refugee problem.
But he hinted that a final settlement on perhaps the most sensitive issue - Jerusalem - may be postponed. The "understanding," he said, "will set forth also, at the end of the day, the framework for how to deal later with the issue of Jerusalem."
On Gaza, Olmert said he discussed several days ago with Egyptian Intelligence Chief Omar Suleiman the "possible terms for what may emerge as a cease-fire."
"We will make exceptional efforts that we will not explain, but Israel naturally will not be able to tolerate continuous attacks on innocent civilians," he said, adding: "We hope that we will not have to act against Hamas in other ways with military power that Israel hasn't yet started to use in a serious manner in order to stop it."
Addressing the same Jerusalem conference, Bush wished Israel a "happy birthday" and joked "save a seat in the ex-leaders' club." He also praised Israel for establishing "one of the world's great democracies in a region where democracy has few roots."
Welcomed by Israeli President Shimon Peres in Jerusalem after landing in Tel Aviv earlier Wednesday, Bush expressed unequivocal support for Israel, which he called "our strongest ally and friend in the Middle East."
Unlike during his first visit in January, Bush will not travel to Ramallah. But he will be briefed on the difficult peace talks by the Palestinian side in meetings with Abbas and Acting Prime Minister Salam Fayyad in Sharm el-Sheikh, Egypt on Saturday and Sunday.
US National Security Adviser Stephen Hadley, briefing reporters en route to Israel, conceded there were "ups and downs" in the negotiations, but said Bush continued "to be hopeful" the sides would be able to reach a deal before he left office.
"The issues are hard. And the process goes forward, and obviously the president is going to try and give some impetus to that process in the conversations he is having on his trip," he said. "We still think this can be done."
With the scores of dignitaries attending the Peres conference along with Bush, as many as 14,000 police were deployed to secure the visit, codenamed "Operation Clear Skies 2," a number higher even than the 10,000 which safeguarded Bush's first visit in January.
But as Israel continued its celebrations - begun already last week according to the Jewish calendar - Palestinians began marking the 60th anniversary of the 1948-1949 Arab-Israeli war that erupted following Israel's creation.
Hundreds of Palestinians clashed with Israeli troops at a number of military checkpoints in the West Bank, who responded to stone- throwing with rubber bullets and teargas, dpa reported.