With Europe dreading more terror, Belgian authorities moved swiftly to pre-empt what they called a major attack by as little as hours Thursday, killing two suspects in a firefight and arresting a third in a vast anti-terrorism sweep that stretched into the night.

The police raid on a former bakery in this provincial rustbelt town was another palpable sign that terror had seeped deep into Europe's heartland as security forces struck against returnees from war in Syria.

"As soon as I opened the window, you could smell the gunpowder," said neighbour Alexandre Massaux following a minutes-long firefight with automatic weapons and Kalashnikovs that was also punctuated by explosions.

Two suspects were killed and a third arrested and charged with belonging to a terrorist organization.

"As soon as they thought special forces were there, they opened fire," federal magistrate Eric Van der Sypt said.

Belgium counterrorism raids

Belgian security forces engaged in a fierce firefight with the suspects. (Bruno Fahy/AFP/Getty Images)

After the gun smoke lifted, police continued with searches in Verviers and the greater Brussels area, seeking more clues in a weeks-long investigation that started well before the terrorism spree last week that led to 17 deaths in the Paris area. The Belgian operations had no apparent link to the terrorist acts committed in France.

And, unlike the Paris terrorists, who attacked the office of a satirical newspaper and a kosher grocery store, the suspects in Belgium were reportedly aiming at hard targets: police installations.

"They were on the verge of committing important terror attacks," Van der Sypt told a news conference in Brussels.

'Extremely well-armed'

Across Europe, anxiety has grown as the manhunt continues for potential accomplices of the three Paris terrorists, all of whom were shot dead by French police. Authorities in Belgium signalled they were ready for more trouble by raising the national terror alert level from two to three, the second-highest level.

Belgium terrorism raids

Police set up a large security perimeter in the city centre of Verviers, where two people were reportedly killed in a "jihadist-related" anti-terrorism operation. (BRuno Fahy/AFP/Getty Images)

"It shows we have to be extremely careful," Van der Sypt said. The Verviers suspects "were extremely well-armed men" equipped with automatic weapons, he said. Authorities have previously said 300 Belgian residents have gone to fight with extremist Islamic formations in Syria; it is unclear how many have returned.

"It sent shivers down my spine to think about it" that the suspects could have been trained in Syria, Massaux said.

Prime Minister Charles Michel said the increase in the threat level was "a choice for prudence."

"There is no concrete or specific knowledge of new elements of threat," he said.

Belgium counterterrorism raids

Belgian police inspect the entrance of an apartment in Verviers following the firefight. (Francois Lenoir/Reuters)

The suspects in Verviers opened fire on police when they closed in on them near the city's train station, the magistrate told reporters. There was an intense firefight for several minutes. Video posted online showed a dark view of a building amid blasts, gunshots and sirens, and a fire with smoke billowing up.

No police were wounded or killed in the clash, which occurred at the height of rush hour in a crowded neighbourhood of this former industrial town of 56,000 about 125 kilometres southeast of the capital, Brussels.

Possible connection to Paris attacker

Earlier Thursday, Belgian authorities said they are looking into possible links between a man they arrested in the southern city of Charleroi for illegal trade in weapons and Amedy Coulibaly, who prosecutors say killed four people in a Paris kosher market last week.

Belgium counterterrorism raids

A Belgian police vehicle is stationed near the federal police building at Congress in Brussels. (Jonas Roosens/AFP/Getty Images)

The man arrested in Belgium "claims that he wanted to buy a car from the wife of Coulibaly," said Van der Sypt. "At this moment this is the only link between what happened in Paris."

Van der Sypt said that "of course, naturally" we are continuing the investigation.

At first the man came to police himself claiming there had been contact with Coulibaly's common law wife regarding the car, but he was arrested following a search on his premises when enough indications of illegal weapons trade were found.

A Belgian connection figured in a 2010 French criminal investigation into a foiled terrorist plot in which Coulibaly was one of the convicted co-conspirators. The plotters included a Brussels area contact who was supposed to furnish both weapons and ammunition, according to French judicial documents obtained by The Associated Press.

Paris gunman was in Spain with 4th suspect

Several countries are now involved in the hunt for possible accomplices to Coulibaly and the two other gunmen in the French attacks.

In Spain, authorities said Coulibaly drove his common-law wife from France to Madrid on Dec. 31 and was with her until she took a Jan. 2 flight to Istanbul.

Verviers, Belgium

(Google Maps)

Spain's National Court said in a statement it was investigating what Coulibaly did in the country's capital with his wife, Hayat Boumeddiene, and a third person who wasn't identified but is suspected of helping Boumeddiene get from Turkey to Syria.

France is on edge since last week's attacks, which began Jan. 7 at the satirical newspaper Charlie Hebdo. The paper, repeatedly threatened for its caricatures of the Muslim Prophet Muhammad, buried several of its slain staff members Thursday even as it reprinted another weekly issue with Muhammad on its cover.

Cyberattacks in France

Defence officials said Thursday that France was under an unprecedented cyber assault with 19,000 cyberattacks launched after the country's bloodiest terrorist attacks in decades, frustrating authorities as they try to thwart repeat violence.

Around 120,000 security forces are deployed to prevent future attacks.

Calling it an unprecedented surge, Adm. Arnaud Coustilliere, head of cyberdefence for the French military, said about 19,000 French websites had faced cyberattacks in recent days, some carried out by well-known Islamic hacker groups.

The attacks, mostly relatively minor denial-of-service attacks, hit sites as varied as military regiments to pizza shops but none appeared to have caused serious damage, he said. Military authorities launched round-the-clock surveillance to protect the government sites still coming under attack.