Somalia's Ethiopian-backed government and its rivals in an Islamic movement fought to a bloody standstill today, and geared up for a major push as fearful villagers fled.

Thousands of Somalis fled their homes today as government and Ethiopians troops used artillery to defend against Islamic fighters attempting to advance on the UN-backed regime’s only stronghold.

Bodies lay in the streets and fighters pounded each other with heavy artillery and mortars for a third day today as Somalia’s Islamic leader announced the country was now at war, leaving a day-old peace initiative in tatters.

Fighting broke out today between Somalia’s government troops and rival Islamic militia near where an EU envoy was meeting with senior leaders to press for peace talks.