Ehud Olmert said "under no circumstances can we allow the situation in the south (of Israel) to continue the way it has in recent months, and the crossroads on a decision on how things will be handled is very close."

The premier declined to go into details of Israeli plans to respond to rocket firings by Palestinian militants.

A rocket attack on a shopping mall in the southern Israeli city of Ashkelon on Wednesday wounded 14 people and took place during US President George W Bush's visit to the Jewish state.

In recent days several ministers in Israel's security cabinet have said they favoured a large-scale military operation to crush the Islamist Hamas movement, which took control of Gaza nearly a year ago.

Olmert's remarks also came after Hamas announced that it was sending a delegation to Egypt on Monday for a new round of talks on a possible Gaza truce.

Egypt has been serving as a mediator because Israel refuses direct contact with Hamas which it considers a terrorist organisation.

In exchange for stopping rocket attacks against southern Israel, Hamas has said it wants Israel to lift a punishing blockade of Gaza and reopen border crossings, especially Rafah on the border with Egypt.

Israel has demanded an end to both rocket firings and arms smuggling from Egypt's Sinai peninsula and progress in negotiations to release Israeli soldier Gilad Shalit, captured by Palestinian commandos in 2006.

Source: DDNEWS