Two Palestinians were killed and over 40 injured during an Israeli army raid on the West Bank town of Ramallah last night.
An Israeli soldier was also shot dead while arresting fighters from Palestinian leader Yasser Arafat's Force 17 guards in Ramallah, an army spokesman said today.
A second soldier was slightly injured in the incident.
The West Bank town of Ramallah was the scene of intense clashes as Israeli tanks and helicopter gunships made a four-hour incursion into the autonomous Palestinian town.
The raid was in response to a Palestinian ambush near Jerusalem which killed an Israeli settler, the Israeli army claimed.
Witnesses said the incursion prompted fierce gunbattles in the city. Palestinian policemen returned fire as helicopter gunships swooped low over Ramallah, firing missiles towards at least one Palestinian security checkpoint.
The death brings the toll of a year of unrest in the region to 810, including 620 Palestinians and 167 Israelis.
Prospects for ending bloodshed were dealt a blow just hours before the attack when Israel called off truce talks with Palestinian President Yasser Arafat.
An Israeli political source said foreign minister Mr Shimon Peres, at prime minister Ariel Sharon's behest, would not meet Mr Arafat for talks provisionally scheduled for Gaza today.
"There won't be a meeting tomorrow. Peres still wants to meet Arafat but Sharon thinks a meeting would be harmful at this time," the source said, adding that there were no immediate plans to reschedule the talks.
Mr Sharon, who insists there be an end to violence before peace talks resume, has been locked in disagreement with his foreign minister over the meeting.
"Sharon is showing his true face. All he wants is to continue his aggression against the Palestinians," Palestinian information minister Mr Yasser Abed Rabbo said in response to the cancellation.
Mr Peres has claimed failure to maintain a peace dialogue could harm US efforts to draw Arab nations into its anti-terrorism international alliance after Tuesday's attacks on New York and Washington that killed thousands.
Palestinians and Western diplomats had said earlier yesterday that they expected the meeting to go ahead.
AFP &