Israel breaks off peace talks after latest violence

Israel has broken off truce talks with the Palestinians after retaliating for an attack on a Jewish settlement which killed two people.

Army bulldozers moved into northern Gaza on Wednesday, levelling farmland, after tanks shelled Palestinian police positions.

Four policemen and a civilian were killed in the shelling and another Palestinian was killed in an exchange of fire, Palestinian officials said.

Also on Wednesday, Palestinian gunmen opened fire at a large crowd of Israelis celebrating the holiday of Sukkot in Hebron, wounding two women, one seriously. After nightfall Palestinian gunmen opened fire on an Israeli vehicle near Jerusalem, seriously wounding a pregnant woman and her husband.

The latest incidents come after two armed Palestinians infiltrated the Israeli settlement of Elei Sinai. Opening fire and throwing grenades, they killed two Israelis and wounded 15 others, the first attack of its kind on a settlement in a year of fighting.

Israeli Defence Minister Binyamin Ben-Eliezer said Israel was stopping talks with the Palestinians "until the Palestinian Authority has taken control and stops terrorism".

Israel radio said two meetings were cancelled - a high-level session with Israeli Foreign Minister Shimon Peres and Palestinian negotiators Ahmed Qureia and Saeb Erekat and a meeting of military commanders.

The militant Hamas took responsibility for attacking the settlement and Yasser Arafat's Palestinian Authority denounced the infiltration, calling it a violation of the ceasefire.

But Palestinian Cabinet secretary Ahmed Abdel Rahman charged that Israel is carrying out a contradictory policy, calling on Palestinian police to arrest militants and then attacking the same police.

He said that despite terms of the truce, Israeli tanks are still surrounding Palestinian cities and towns. He said international efforts to calm the situation "cannot succeed without sending observers immediately to Palestinian territories".