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Palestinians stand in the street as smoke caused by explosions from Israeli military operations rises over a building in Rafah, southern Gaza Strip, on Monday. ((Eyad Baba/Associated Press))

World leaders called for a ceasefire in the fighting between Israeli forces and Hamas as civilian casualties climbed in the Gaza Strip.

Israel and Hamas must reach a ceasefire as soon as possible, French President Nicolas Sarkozy said Monday during a peacemaking trip to the Middle East.

Sarkozy, who spoke at a news conference with Palestinian President Mahmoud Abbas in the West Bank, said he would deliver that message to Israeli leaders later in the day.

"I will tell [Israeli] President Shimon Peres and Prime Minister Ehud Olmert in all frankness that the violence must halt. We in Europe want a ceasefire as quickly as possible, and that everyone understands that time is running against peace," Sarkozy said. "The guns must fall silent. There must be a humanitarian truce."

He harshly criticized Hamas for acting in an "irresponsible and unforgivable" way, saying the militant organization "is to blame for the suffering of the Palestinians."

In the United States, President George W. Bush said Monday he hoped for a ceasefire but added that it would not work unless Hamas stopped its attacks.

"The situation now taking place in Gaza was caused by Hamas," Bush told reporters in the Oval Office.

"Instead of caring about the people of Gaza, Hamas decided to use Gaza to launch rockets to kill innocent Israelis," he said. "Israel's obviously decided to protect herself and her people."

Casualties increase as Israeli assault enters 10th day

Sarkozy's visit comes as Israeli soldiers, backed by tanks and helicopter gunships, battled militants at close range on Monday, the 10th day of the Israeli military campaign. Black smoke and dust billowed from the city as the attacks continued from the air, land and sea.

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French President Nicolas Sarkozy, left, is greeted by Palestinian President Mahmoud Abbas in the West Bank city of Ramallah on Monday. ((Philippe Wojazer/Associated Press))

At least 20 Palestinian children died during the day, including three young brothers who were killed by a shell, Gaza health official Dr. Moaiya Hassanain said.

Gaza officials estimate there have been 550 deaths in the territory since Israel launched its air strikes on Dec. 27 and almost 2,500 have been wounded. UN authorities believe at least 500 people have been killed in the fighting and that as many as 25 per cent are civilians, UN humanitarian chief John Holmes said.

Eight Israelis, including four soldiers, have also died. Three of the four soldiers were killed Monday in a friendly-fire incident, when when an errant tank shell hit their position outside Gaza City. Twenty-four other soldiers were injured in that incident, the Israeli military said.

Dozens of Hamas fighters have been killed since ground troops entered the region on Saturday, officials with the Israeli army said.

'Harsh blow'

"Hamas has sustained a very harsh blow," Israeli Defence Minister Ehud Barak told parliament's foreign affairs and defence committee. "But we still haven't reached our objectives, so the offensive continues."

Barak said the offensive would continue until Israel achieved "peace and tranquility" for residents of southern Israel who continued to be bombarded by Palestinian rocket and mortar fire.

Militants fired about 24 rockets at Israel by midday Monday and Gaza's Hamas strongman urged Palestinians to "crush" the invading Israeli forces and target Israeli civilians.

"The Zionists have legitimized the killing of their children by killing our children. They have legitimized the killing of their people all over the world by killing our people," Mahmoud Zahar said in a grainy video broadcast on Hamas TV.

Hamas said Israeli aircraft struck two mosques in central and northern Gaza, while ground troops battled with militants armed with mortar shells, grenades and antitank missiles in the area between Gaza City, Gaza's largest urban area, and Jebaliya to the north.

The streets of Gaza City, home to 400,000 people, were almost empty.

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Palestinian boys walk amid the debris of a destroyed house that was hit by an Israeli missile in Gaza City on Monday. ((Khalil Hamra/Associated Press))

But long lines were forming outside the few bakeries, pharmacies and grocery stores that are still trying to open during the day, said Al-Jazeera reporter Ayman Mohyeldin, who is one of the few foreign journalists still inside Gaza.

It is the civilian population that is bearing the brunt of the offensive, Mohyeldin said.

The battles have now moved into densely populated areas around Gaza City and are taking place in close proximity to residents.

The Israeli military said aircraft carried out 30 sorties overnight, striking a mosque in Jebaliya that contained a large store of weapons, and an underground arms bunker in the Gaza City area that touched off secondary explosions and collapsed underground smuggling tunnels.

No power, phones

The violence has deepened the suffering in Gaza, home to 1.4 million people, aid agencies say.

The UN estimates about 13,000 Palestinians have already fled their homes and set up shelters along the northern section of the Gaza strip.

People are now without electricity and about 85 per cent of Gaza City residents are now without phone lines, Mohyeldin said.

"That creates a sense of fear and panic among the people here because they are not able to get information," he said.

Holmes, the UN under-secretary general for humanitarian affairs, called on Israel to leave border crossings open longer during an update in New York on Monday.

"We hope they will remain open on a more permanent basis so that we can get the goods in that we need," he said, noting that Gaza has shortages of medical supplies, industrial fuel for its power plant, wheat grain and shelters.

About 450,000 litres of industrial fuel, small amounts of cooking gas and 60 supply trucks were allowed into Gaza Monday, Holmes said.

"It’s better than nothing, but again, it's inadequate to deal with the issues," he said.

Humanitarian crisis exaggerated: Israel

Israeli Foreign Ministry spokesperson Ofir Gendelman said reports of a humanitarian crisis are exaggerated because aid groups depend on reports from Palestinians inside Gaza.

"All the people who are working for CARE and the UN in Gaza are Palestinians and they know exactly what would happen to them if they would say anything that contradicts Hamas’s party line," he said.

Israel is making "every effort" to avoid civilian casualties, he said.

"Eighty per cent of all the energy our air force puts into these sorties is put into making sure no civilian casualties are suffered.  No other army in the world would put so much effort into this," he said.

Mark Regev, spokesman for Israeli Prime Minister Ehud Olmert, said that Israel is doing its best to keep people out of the combat zone.

"We don't want to see civilians caught up in the fighting in Gaza," Regev said. "I can't say that strongly enough. Our enemy is not the civilian population of Gaza."

If civilians are killed, then Hamas is to blame because it operates within civilian areas, said an Israeli military spokeswoman, Maj. Avital Leibovich.

"If Hamas chose cynically to use those civilians as human shields, then Hamas should be accountable," she said. "Civilians will probably continue to get killed, unfortunately, because Hamas put them in the first lines of fire."

Foreigners allowed to leave Gaza

Israel said several busloads of foreigners would be permitted to leave Gaza on Monday.

Iran asked Egypt for permission to set up a field hospital on Monday, saying it was ready to treat Gaza's wounded.

Iranian officials have condemned Israel for its attacks and have expressed support for Hamas, while condemnation of Israel's ground operation poured in from the Middle East and Europe.

Canadian Foreign Affairs Minister Lawrence Cannon said in a weekend statement, "Canada is deeply concerned about the increase in hostilities between Israel and Hamas."

In a news conference on Monday, Livni said that Israel has a right to defend itself.

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An Israeli woman walks under the damaged roof of a temporarily closed food market minutes after a rocket fired by Palestinians militants from Gaza hit Sderot, southern Israel, on Monday. ((Bernat Armangue/Associated Press))

"When Israel is being targeted, Israel is going to retaliate," Livni said. "Israel is going to give an answer to it because this is an ongoing, long battle, war against terror."

One reason Israel launched the Gaza campaign was because militants have acquired weapons able to reach closer to Israel's Tel Aviv heartland. Israel has said that Hamas rocket fire now threatens major cities and one-eighth of Israel's population of seven million people.

"Those one million Israelis are entitled to have normal lives — that they shouldn't have to live in constant fear of an incoming rocket," Regev said.

Israel believes Hamas has an arsenal of more than 2,000 rockets, Gendelman said.

"If we are able to hit Hamas hard and make sure that its military capability is strongly diminished, then it serves peace and it helps the Palestinian Authority get back to Gaza," he said.

"I am receiving e-mails — as the spokesman for the ministry for the Arab media — from Gazans who are … calling on Israel to destroy Hamas, to give them a better life."

Abbas to UN

In Israel, schools and non-essential industries stayed shut within 40 kilometres of Gaza, the maximum range in Hamas' missile arsenal.

Hamas officials said a delegation has been sent to Egypt for ceasefire talks. But Hamas spokesmen have said any truce will require an end to the blockade of Gaza, imposed by Israel and Egypt after the Islamic militants' violent takeover of the territory 18 months ago.

Abbas is heading to the UN in New York on Monday, after meetings with Sarkozy and top European diplomats in the West Bank, to lobby for a ceasefire deal.

Israel has demanded stronger guarantees that Hamas will halt rocket fire on towns and cities in southern Israel.

"If we withdraw today, without reaching some kind of comprehensive agreement, we haven't done anything," Israeli cabinet minister Binyamin Ben-Eliezer told Army Radio. "The military has to carry on with its work."

With files from the Associated Press