SRI LANKA's Tamil Tiger separatists ambushed an army road clearing patrol yesterday, killing 29 soldiers and losing at least 35 of their own, dashing hopes that the island's civil war is close to an bend.
It was the biggest battle in three months on the Indian Ocean island which, with a slowing economy, expects to pay much more than the budgeted 38 billion rupees ($690 million) for this year's defence expenditure.
The battle launched by the Liberation Tigers of Tamil Eelam (LTTE) was fought near Trincomalee, Sri Lanka's main eastern port, about 240 km north east of the capital, Colombo, the defence ministry operational headquarters spokesman said.
Troops were clearing the road of land mines 25 km south of the port when they were ambushed from both sides along a front about 1 km long, the spokesman said.
The military spokesman said reinforcements were brought in and "artillery fire was directed at the terrorists who were attempting to withdraw towards the jungle."
He said the LTTE death toll was expected to rise, as they had suffered 20 wounded, 16 of them critically, according, 19 monitored rebel radio transmissions.
The attack follows weeks of smaller, hit and run raids in the east and north after the LTTE was routed from its Jaffna peninsula stronghold earlier this year.
It comes as an all party parliamentary committee continues to debate the government's devolution peace package" for Tamils offering widespread legislative and executive powers, a plan rejected by the hard line LTTE.
It also comes as the economy continues to slide, hit by 13 years of fighting, a fall in tourism and a daily 51/2 hours of power cuts, triggered by a failure of monsoon rains to fill reservoirs.
"It's a miserable situation", said a Western diplomatic source. "The war just dribbles on. The Tigers are off the peninsula but they have proved they are still armed and dangerous.
He said the main grievance among Sri Lankan youth was not an ethnic one but economic, and he feared a revival of the Janatha Vimukti Peramuna (JVP), a party made up of disaffected southern youth that launched insurrections in 1971 and 1989.
The government last month unveiled plans costing 51.8 billion over the next five years to develop the southern Ruhunu region.
Many analysts saw this as an attempt to reassure the estimated 20 per cent unemployed in the region of its commitment to the south while defence costs soar in the north.
. The LTTE's official organ, Viduthalai Puligal, or the Liberation Tiger, said government forces were unable to control both the northern and eastern regions at the same time.