Militants and police in Gaza shootout

1.00pm

RAFAH, Gaza Strip - Palestinian gunmen have battled forces loyal to Yasser Arafat's security chief in Gaza, signalling a growing breakdown of law and order in a fresh challenge to the Palestinian leader's rule.

Dozens of gunmen, many of them masked, exchanged heavy fire with forces loyal to Arafat's cousin Moussa Arafat, whom he appointed as Gaza's new security chief following a series of high-profile abductions in the strip over the weekend.

At least 12 Palestinians were wounded, one critically, in the fighting between militants and policemen holed up in a security compound in the southern town of Rafah, medics said.

The violence intensified pressure on Arafat to wipe out alleged widespread corruption that sparked the crisis, deepened by the resignation of Prime Minister Ahmed Qurie.

Arafat has not seen such turmoil since his Palestinian Authority took control over most of the Gaza Strip in 1994 under interim peace accords with Israel.

In a show of force, thousands of gunmen marched across the Gaza Strip on Sunday night demanding that Arafat fire Moussa Arafat, a member of an old guard widely viewed as corrupt.

"This corruption is like a cancer," gunmen shouted in a rally at the Nusseirat refugee camp in central Gaza.

In Rafah, gunmen and Palestinian security forces exchanged intermittent fire as militants demanded policemen leave a military intelligence compound so they could set it on fire. They later burned down a security services office.

"Arafat, where are the reforms you promised," shouted gunmen in the nearby town of Khan Younis before burning a car belonging to a senior security official loyal to Arafat.

Arafat told Qurie he "strongly rejects" his decision to quit, cabinet minister Saeb Erekat said. Arafat was expected to urge Qurie to change his mind in a cabinet meeting on Monday.

Calls for reform have multiplied amid a brewing factional power struggle in the Gaza Strip in anticipation of Israeli Prime Minister Ariel Sharon's planned withdrawal of troops and settlers from the occupied territory by the end of 2005.

"What is happening in the Palestinian Authority proves that all the contrived efforts to show that there is someone to talk to on the Palestinian side are motivated by personal interests and are unrealistic," Sharon was quoted as telling his cabinet.

Eager to stabilise his faltering government so it can push through his Gaza pullout plan, Sharon kicked off coalition negotiations with centre-left Labour Party on Sunday. Labour officials said it might take several weeks to reach a deal.

MILITANTS BURN DOWN POLICE STATION

Earlier in Khan Younis, gunmen burned down a post manned by members of a security service controlled by Moussa Arafat, sending officers fleeing into the night.

Al-Aqsa Martyrs Brigades, a militant group within Arafat's Fatah faction, said it destroyed the facility to protest Moussa Arafat's appointment. At a news conference after the attack, Moussa Arafat said he had no intention of stepping down.

In a new blow to the Palestinian president's prestige, the commander of the Palestinian coast guard, Juma Ghali, tendered his resignation in protest at Moussa Arafat's appointment.

Qurie, when submitting his resignation, had complained about "unprecedented chaos" in Gaza triggered by the brief abduction on Friday of four French aid workers, the police chief and another official by gunmen demanding reforms.

"People are simply fed up," Sufian Abu Zaideh, a Palestinian deputy minister, told Israeli Army Radio.

In the past, Arafat has paid little more than lip-service to reforms likely to diminish his influence.

Militants urged Arafat to try officials accused of corruption and said trouble could spread to the West Bank, home to 2.3 million Palestinians as well as Arafat and most of his Authority's institutions. About 1.3 million Palestinians live in Gaza.

Palestinian officials say Arafat's ability to carry out reforms or rein in militants has been hampered by constant Israeli raids. Israel and the United States accuse Arafat of fomenting violence, which he denies.

- REUTERS