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VALACHCHENAI, Sri Lanka - Sri Lanka's military said it sank 22 Tamil Tiger boats in a sea battle on Thursday after what it said was a rebel attempt to sink a passenger ship with 300 civilians aboard in a suicide attack.
The military said air force jets and helicopter gunships were brought in after the rebels sank a navy fast attack boat.
The Tigers accused the military of provoking the clash by attacking their vessels during exercises at sea.
The clash off the island's northern tip came as thousands of Tamil refugees fled a camp in rebel territory in the restive east a day after the army bombed it, killing dozens of civilians.
Many fear the worst violence since a now-battered 2002 ceasefire could turn into a full-blown return to a war that has killed well over 65,000 people since 1983.
"They tried to sink a passenger vessel. The navy sank eight boats, and then the air force sank another 14," military spokesman Brigadier Prasad Samarasinghe said. "They are trying to rescue the Navy sailors. There are survivors."
The Tigers said they sank one navy boat and that a second was on fire and sinking, but denied any suicide boats were involved. They said all their boats had returned safely to base.
Meanwhile, rights groups and diplomats voiced outrage at Wednesday's army artillery attack in the eastern district of Batticaloa, where doctors tended at least 125 civilians with multiple shrapnel wounds, including infants and elderly.
Palachchenai Kadiraveli, 29, managed to board a fishing boat with her daughter and 20 others before dawn on Thursday, escaping across a lagoon patrolled by navy fast attack boats to government-held territory.
"There were a lot of explosions, so many people dead and wounded," she said after landing near the town of Valachchenai.
"A lot of children died.
"My husband stayed behind to protect our belongings. There are thousands of people trying to leave," she said, clutching two bags containing clothes and a bottle of soda.
Nordic truce monitors said they had received reports that thousands of people were on the move in the rebel-held area, where around 35,000 people are camped out after being displaced by fighting which flared further north in August.
"My son stopped to talk to friends near the refugee camp," said 43-year-old labourer Sellappa Rajendran, weeping outside Batticaloa hospital morgue. "There was a huge explosion, masses of smoke. I saw a lot of dead bodies. One was my son."
The Tigers say 47 people were killed in Wednesday's attack on the camp, set up in a school in the rebel-held village of Kathiraveli. Nordic truce monitors counted 23 corpses, but did not rule out a higher figure.
"Our monitors saw there were no military installations in the camp area, so we would certainly like some answers from the military regarding the nature and reasons of this attack," said Sri Lanka Monitoring Mission spokeswoman Helen Olafsdottir.
The attack came after days of artillery duels between the military and the Liberation Tigers of Tamil Eelam in the island's north and east, where the rebels want to carve out a separate homeland for minority Tamils.
The military accused the Tigers of using civilians as human shields and exaggerating casualties.
"While we regret this whole episode, we also say that national security is utmost and it has to be maintained, and as such defensive action by the authorities is something that is inevitable," said defence spokesman Keheliya Rambukwella.
Peace mediator Norway said it was appalled at what it called a government "onslaught".
- REUTERS
