By DPA
Gaza/Jerusalem : Israeli Prime Minister Ehud Olmert's inner security cabinet decided Wednesday against expanding a two-week-old offensive in the Gaza Strip in response to intense rocket fire at its southern towns and villages from the area.
But it would proceed with thus-far nightly air strikes and also continue limited ground incursions on the same scale as before.
"Israel is not negotiating a ceasefire with any terrorist organization," a cabinet statement said, adding: "Israel will continue to strike at – and exert military pressure on – terrorist organizations, especially on Hamas and Islamic Jihad, without being held to any specific timetable.
Both the ruling Palestinian movement Hamas and the smaller opposition group have claimed responsibility for many of nearly 270 Hamas-made Qassam and Islamic Jihad-made al-Quds rockets launched at Israel since mid-May.
Hamas began escalating the rocket-fire in a bid to restore unity and end a week of deadly internecine fighting with the rival, coalition Fatah party of President Mahmoud Abbas.
Israel meanwhile pressed on with its air strikes overnight, killing two militants of the radical Islamic group in northern Gaza as they were trying to launch a Qassam rocket at Israel before dawn Wednesday, Palestinian security officials reported.
A house in the southern Israeli town of Sderot also suffered a direct hit from a rocket fired by the Popular Resistance Committees (PRC). No one was injured, but several people were treated for shock.
On Tuesday, some 10 tanks crossed several hundred metres into the southern Gaza Strip, sparking exchange of fire with Hamas gunmen who confronted the troops in the first such ground operation since the offensive got underway.
Olmert's security cabinet authorized the military to continue such limited ground incursions up to the outskirts of Palestinian populated-areas in the Strip, without entering cities and towns.
But it did not give the green light for a wider ground operation in Gaza.
Several hardline ministers in the 12-strong forum had demanded tougher action against the militant groups behind the rocket-fire.
Foreign Minister Tzipi Livni accused Hamas of "exploiting" any period of calm to rebuild itself and plan attacks at dates "convenient" for it, Israel Radio reported.
European Parliament President Hans-Gert Poettering, meanwhile, condemned the Palestinian rocket-fire "in the strongest possible terms," but urged Israel "to avoid reacting disproportionately."
Some 52 Palestinians and two Israelis have been killed in the mutual attacks in and from Gaza in the past fortnight.