Israel-Gaza violence intensifies after attacks (Reuters)

GAZA (Reuters) – Israel struck militants in Gaza and Palestinians fired rockets back on Friday following deadly gun attacks along the desert border with Egypt that have raised tensions between Israel and the new rulers in Cairo.

Egypt formally protested and demanded Israel investigate the deaths of three of its security men, who, it said, where killed when Israeli forces hunted for the gunmen behind Thursday's roadside ambushes. In all, more than 20 people have been killed.

Eight Israelis perished in Thursday's assault along the Egyptian border, and at least seven of the attackers also died as Israeli forces tracked them down along the largely open frontier with Egypt.

Israel swiftly pinned the blame on a Palestinian group that is independent of the Hamas Islamist movement which governs Gaza, and struck back with two days of air strikes killing eight militants and two civilians, children aged 2 and 13.

An airstrike killed the faction's leadership on Thursday and there were numerous other strikes throughout Friday. Huge crowds gathered for the funerals, chanting anti-Israeli slogans and vowing revenge.

Israel, stunned by an assault along a long quiet border, threatened further attacks.

"We have a policy of exacting a very heavy price of anyone who attacks us and this policy is being implemented," Israeli Prime Minister Benjamin Netanyahu said on Friday while visiting wounded compatriots in hospital.

Hamas Islamists in control of Gaza also cautioned they would respond. "We will not allow the enemy to escalate its aggression without getting punished," the group's armed wing said.

Militants in the tiny coastal Gaza enclave fired 17 rockets at southern Israeli cities on Friday, the Israeli military said. Two rockets targeting the city of Ashdod hit a synagogue and a school, injuring two people, one of them seriously.

Israel said Thursday's attackers had slipped out of Gaza and into Egypt's Sinai desert, and then headed south before infiltrating Israel close to the Red Sea resort of Eilat.

Israeli forces had been on high alert for a possible attack and was swift to blame the Popular Resistance Committees (PRC) armed faction. The group denied involvement in Thursday's ambushes, but did claim responsibility for some of Friday's rocket fire.

The PRC said its commander, Kamal al-Nairab, his deputy, Immad Hammad, and three other members were killed in Thursday's air strike on a home in Rafah, by the Gaza border with Egypt.

EGYPT LOSING SINAI GRIP?

Israeli leaders accused Egypt's new military leaders of losing their grip on the Sinai peninsula. Cairo rejected the charge, but Israel fears its once sleepy southern flank is rapidly becoming a major security threat.[nL5E7JI440]

"We would hope that yesterday's terrorist attack on the border would serve as an impetus for the Egyptian side to more effectively exercise their sovereignty in Sinai," said a senior Israeli official, who declined to be named.

Cairo rejected the charge and voiced anger at the death of an army officer and two security officials on their side of the border on Thursday, although it was not clear how they died. Witnesses said those who attacked the Israelis had disguised themselves as Egyptian security forces.

"Egypt has filed an official protest to Israel over the incidents at the border yesterday and demands an urgent investigation over the reasons and circumstances surrounding the death of three of Egypt's forces," an army official in Cairo said.

The Israeli military said there was an exchange of fire between its troops and the militants along the border on Thursday night. "The IDF (army) will investigate the matter thoroughly and update the Egyptians," it said in a statement.

The sparsely populated Sinai forms a huge desert buffer zone between Egypt and Israel, who sealed an historic peace treaty in 1979 after fighting two wars in less than a decade.

Israel enjoyed good relations with U.S.-backed former Egyptian President Hosni Mubarak, but following his downfall in February, Israeli officials have regularly voiced concern about a security vacuum along their joint border.

In Washington, U.S. Secretary of State Hillary Clinton condemned the "brutal and cowardly attacks" on the Israelis near Eilat. She said the violence "only underscores our strong concerns about the security situation in the Sinai Peninsula."

(Additional reporting by Ari Rabinovitch and Allyn Fisher-Ilan in Jerusalem and Marwa Awad in Cairo; Editing by Jon Boyle)

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Violence escalates in London (Reuters)

LONDON (Reuters) – Riots spread to new areas of London Monday in a third night of violence as hooded youths torched cars and buildings, hurled missiles at police and looted shops, in the worst unrest in the British capital for decades.

Police were out in force, but struggled to stop disturbances spreading to Hackney in east London, close to the site of next year's Olympics games, and Peckham and Lewisham in south London.

Flames leaped into the air from a building in Peckham and cars were set on fire in several areas of London as gangs of youths roamed the streets.

The disturbances started late Saturday in London's northern Tottenham district when a peaceful protest over the police's shooting of a suspect turned violent, leaving parts of the high street charred and its shops looted.

Home Secretary Theresa May, who cut short her holiday to take charge of the government response to the riots, said arrests had climbed to 215 and 27 people had been charged.

"The violence we've seen, the looting we've seen, the thuggery we've seen, this is sheer criminality ... These people will be brought to justice. They will be made to face the consequences of their actions," she said.

The mayhem has so far been centered mainly in multi-ethnic, poorer parts of London, only a few miles from the Olympic park that will welcome millions of visitors in less than a year.

A Reuters witness described chaotic scenes in Hackney in which at least one vehicle had been set alight, as well as many rubbish bins.

Youths threw what appeared to be fireworks at the police, while officers in formation sporadically charged the youths to try and disperse the crowd.

At the confrontation in Hackney continued, violence flared in the south London areas of Lewisham and Peckham, with many using the micro-blogging website Twitter to post links to pictures of youths smashing shop windows.

LOCKDOWN

Some Twitter users said their area was in "lockdown" as police tried to reclaim the streets, while others said they were rushing home to safeguard their property.

Police said a double decker bus had been set alight in Peckham. In Hackney, youths, some in hooded tops, broke shop windows, including that of a Ladbrokes betting shop.

The BBC said the Hackney clashes broke out after police stopped and searched a man.

"We had boarded the whole place up, but they broke down the door and smashed up the place. They threw a bottle at me and it hit my leg," said the owner of a petrol station in Hackney, blood pouring from this leg.

British government officials branded rioters who fought police, looted shops and set fire to buildings as opportunistic criminals and said the violence, the worst in London for years, would not affect preparations for next summer's Olympic Games.

Police Deputy Assistant Commissioner Steve Kavanagh said the force was putting more officers on the streets in Hackney and other areas Monday night.

"Let me make it clear that people who are using current events as an excuse or cover to break the law, steal, attack police officers and cause fear to Londoners will not be tolerated by the vast majority of Londoners and us," he said.

"Our investigation, which is massive in scope, is continuing," he said in statement.

BARRICADES

A small group of people said they had barricaded themselves inside the 110-year-old Hackney Empire theater to escape the violence.

"We are stuck inside," said one person, who did not give her name, in a telephone conversation with Reuters.

"We don't want to be near the windows. They seem to be targeting shops at the moment. It's very scary."

"We are in the back of the building, staying away from the front. We have barricaded the doors and put chains on the doors."

Youths appeared to have used a free message service on Blackberry mobile phones to coordinate attacks on shops and police.

Research In Motion, the Canadian manufacturer of Blackberry smartphones, said it would work with British authorities, but gave no details on what information, if any, it would give the police.

"We feel for those impacted by this weekend's riots in London. We have engaged with the authorities to assist in any way we can," RIM spokesman Patrick Spence said in a statement.

Some have branded the disturbances as a cry for help from impoverished areas reeling from the government's harsh austerity cuts to tackle a big budget deficit, with youth services and other facilities cut back sharply.

"Tottenham is a deprived area. Unemployment is very, very high ... they are frustrated," said Uzodinma Wigwe, 49, who was made redundant from his job as a cleaner recently.

Officials said there was no excuse.

"It was needless, opportunistic theft and violence, nothing more, nothing less. It is completely unacceptable," said Deputy Prime Minister Nick Clegg.

(Additional reporting by Adrian Croft, Mohammed Abbas and Avril Ormsby; Editing by Myra MacDonald)

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Pakistani troops in control after Karachi violence (AP)

By ASHRAF KHAN and NAHAL TOOSI, Associated Press Ashraf Khan And Nahal Toosi, Associated Press – 2?hrs?8?mins?ago

KARACHI, Pakistan – Pakistani forces regained control Saturday over trouble spots in the nation's largest city, where five days of political and ethnic violence killed at least 93 people and forced many to stay at home in fear, an official said.

The fighting in Karachi, a sprawling southern port city of 18 million people, has added to the political instability in this nuclear-armed, U.S.-allied nation and provided another distraction for the government as it fights a Taliban-led insurgent movement. It also undercuts the country's struggling economy, because Karachi is its main commercial hub.

The latest spell of violence is extraordinary even by the standards of Karachi, a city that routinely witnesses more than 1,000 violent deaths a year, many of them targeted killings linked to political, ethnic and sectarian rivalries.

It follows the decision by the city's most powerful political party, the Muttahida Qaumi Movement, to leave the federal ruling coalition and join the opposition. Such moves by the MQM have traditionally been accompanied by outbursts of fighting.

The fighting in some areas got so bad that security forces were ordered to shoot gunmen on sight Friday.

"Four or five homes were burned in our own street, and so badly that no one could put the fire out. And whenever someone tried to do so, there was a shootout," said Mohammad Kashif, who spent much of the week holed up in his house.

By Saturday evening, authorities said more than 150 suspects were detained and that paramilitary Rangers and other security units had brought the violence under "complete control."

"The Rangers have completely taken over the affected areas and the miscreants have been swept out," said Maj. Farooq Bilal, a Rangers spokesman.

Many of the killings, which began Tuesday, appeared linked to political and ethnic turf battles, officials said. Some of Karachi's leading political parties have been formed along ethnic lines, though all deny targeting one another's activists.

The MQM dominates Karachi politics, but over time it has seen challenges to its power as an influx of ethnic Pashtun residents has moved to the city and given a boost to the rival Awami National Party, a Pashtun nationalist party.

Also in the mix is the ruling Pakistan People's Party. All three parties were partners in the federal ruling coalition until late June, when the MQM said it would join the opposition.

Interior Minister Rehman Malik said those behind the attacks were ultimately helping the Taliban, who want "mass killings" and "destabilization."

The U.S. has a keen interest in keeping Pakistan stable — it needs the country to stay focused on fighting Taliban and other Islamist militants, some of who threaten Western troops across the border in Afghanistan. But Pakistan has for the most part taken action only against militants who stage attacks on its soil.

Late Friday, a Pakistani warlord who has focused on fighting U.S. and NATO troops in Afghanistan condemned militants who carry out attacks on Pakistani soil. Hafiz Gul Bahadur's statement illustrates the splintered nature of the Islamist militant movement in Pakistan.

Because Bahadur's fighters don't go after Pakistani targets, the Pakistani military has largely left him alone. However, his territory in the North Waziristan tribal region has come under attack by drone-fired U.S. missiles.

Earlier this week, an army convoy was struck by a roadside bomb in North Waziristan.

That prompted the army to retaliate, including destroying a hospital where the suspected militants behind the bombing were believed to be hiding, said intelligence officials, who spoke on condition of anonymity because they were not authorized to speak on the record to media.

Bahadur warned that his fighters would pursue militants behind such acts, saying they must be American agents.

"We give a go-ahead to all commanders in Waziristan, mujahedeen and people to kill such criminals who come to do such acts again in populated areas, houses or hotels, and we will take responsibility for that," said his statement, issued after he met a group of like-minded militant leaders.

Meanwhile, gunmen attacked a NATO oil supply tanker in Mastung district, some 50 kilometers south of Quetta, the capital of Baluchistan province, killing a driver and one of his helpers, said a government official, Mohammad Ismail.

The supplies for NATO and its allied U.S. troops in Afghanistan pass through the province which has long been the scene of a low-level insurgency by nationalist groups vying for a bigger share in regional natural resources.

___

Toosi reported from Islamabad. Associated Press writers Muhammad Farooq in Karachi, Abdul Sattar in Quetta and Rasool Dawar in Peshawar contributed to this report.

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Greek lawmakers endorse austerity despite violence (Reuters)

ATHENS (Reuters) – Greece's parliament approved deeply unpopular austerity measures despite worsening street violence on Wednesday, in a vote vital to secure international aid and prevent the euro zone's first sovereign debt default.

Lawmakers passed a five-year package of spending cuts, tax rises and state asset sales by a comfortable margin of 155 votes to 138 in a roll-call vote, handing a victory to embattled Prime Minister George Papandreou.

"We must avoid the country's collapse at all costs. Now is not the time to step back," the Socialist premier told lawmakers just before the vote.

The solid margin suggested the government should be able to push through laws implementing specific budget measures and asset sales on Thursday, clearing the last obstacle to obtaining 12 billion euros ($17.3 billion) of emergency loans.

But with the country on the brink of bankruptcy and social unrest mounting, it is unclear whether the government can stick to the tight schedule imposed by the European Union and the International Monetary Fund to implement the austerity steps, even if it wins all this week's parliamentary votes.

The full pain of pay and benefit cuts and sharp tax increases has yet to be felt, and public anger is boiling.

Outside parliament, there were clashes between stone-throwing masked youths and riot police, who fired clouds of teargas from behind steel crash barriers to keep rioters at bay.

One group of anarchists armed with staves and iron bars attacked finance ministry offices just off Syntagma Square, smashing windows at the entrance and on higher floors. A post office on the ground floor of the ministry building was set on fire, sending acrid grey smoke billowing into the sky.

In cat-and-mouse clashes with police, rioters erected makeshift barricades with benches, chairs and garbage bins on the fringes of the square, where thousands of peaceful protesters demonstrated against the austerity plan.

Chancellor Angela Merkel of Germany, Europe's reluctant paymaster and the main contributor to the bailout of Greece, was quick to praise the "brave" vote. But Finance Minister Wolfgang Schaeuble stressed the importance of "implementing these (measures) with resolve in the coming weeks, months and years."

The presidents of the European Council and the European Commission, Herman van Rompuy and Jose Manuel Barroso, said in a joint statement that Greece had taken "a vital step back -- from the very grave scenario of default."

However, many economists and investors still expect Greece to default in the medium term because its 340 billion euro pile of sovereign debt is so huge, about 150 percent of the country's annual economic output. A senior German ruling coalition politician, Free Democratic floor leader Rainer Bruederle, said on Wednesday that a debt restructuring was inevitable.

Expectations for a positive vote and progress in talks between banks and euro zone governments on a rollover of privately held Greek debt lifted the euro and global stocks on Wednesday. Prices of bonds issued by the zone's weaker states rose.

But markets then fell back slightly after news of parliament's decision.

"This is logical and may continue over the next couple of hours and days as markets will quickly realize that this is only a first step on the road to recovery," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets.

"We still expect a hot, nervous and volatile summer."

ROLLOVER

Despite a threat by trade unions staging a 48-hour general strike to prevent lawmakers entering the colonnaded parliament building, deputies were able to reach the chamber. Strikes and sporadic violence have not blown the government off course so far, but its approval rating has plunged in recent months.

Only one deputy in the ruling PASOK party voted against the plan and was immediately expelled from the party by Papandreou. At least one opposition deputy broke ranks with the main conservative New Democracy party and voted "yes."

PASOK now holds 154 seats in the 300-member chamber and it was helped on Wednesday by the abstention of a small center-right splinter group of five deputies led by former foreign minister Dora Bakoyanis.

The EU and the IMF have insisted Greece must adopt the austerity plan, which seeks to save the government 28 billion euros, in order to receive its next slice of aid. Without the money, Athens would run out of cash within weeks.

In May last year Greece signed a 110 billion euro bailout deal with the EU and the IMF, which later jumped in to keep Ireland and Portugal afloat as the euro zone reeled from high government debt in the wake of the global financial crisis.

If Greece's fiscal legislation passes on Thursday, euro zone finance ministers meeting in Brussels on Sunday are expected to agree to release their part of the next aid tranche, with the IMF following on July 5.

Attention will then switch to putting together a second and longer-term rescue package for Greece of about the same magnitude as the initial 110 billion euro bailout.

The new program would involve some 30 billion euros in private-sector participation via a "voluntary" rollover of maturing debt, a similar sum from Greek privatization revenues, and an expected 55 billion euros in new official funding.

Banking sources said politicians and commercial bankers were confident that credit rating agencies would accept a French proposal for a voluntary private sector rollover of Greek debt without triggering a default or a payout of credit insurance.

The agencies have made no public comment on the plan, details of which are still under negotiation.

Euro zone banks and insurers are considering a scheme under which private bondholders would reinvest half of the proceeds of maturing Greek debt in new 30-year bonds paying 5.5 percent interest plus a bonus linked to Greece's economic growth rate.

Of the other half, 30 percent would be paid back to investors in cash and 20 percent invested in a "guarantee fund" of zero-coupon AAA securities with deferred interest that might be issued by the euro zone's bailout fund, officials and banking sources said.

In addition to the rating agencies, the rollover scheme will need the approval of the European Central Bank, and ECB policymaker Juergen Stark rejected on Wednesday any scheme that involved EU guarantees of bonds, saying it would breach European treaty rules.

Asked about a scenario in which banks would exchange their Greek bonds for new paper guaranteed by EU states -- an approach similar to the "Brady bonds" used in Latin America in 1989 -- he said: "This instrument is disqualified.

French banks had the largest exposure to the Greek economy, both the public and private sectors, at the end of 2010 with over $56 billion, data from the Bank for International Settlements shows. The next most exposed country is Germany.

(Additional reporting by George Georgiopoulos, Daniel Flynn and James Mackenzie in Athens, Philipp Halstrick and Ed Taylor in Frankfurt, Stephen Brown in Berlin, and Atul Prakash and Jeremy Gaunt in London; writing by Paul Taylor; editing by Janet McBride and Andrew Torchia)

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Yemen's Saleh to reappear as violence grips south (Reuters)

RIYADH/SANAA (Reuters) – Wounded Yemeni President Ali Abdullah Saleh, not seen in public since an attack on his palace in early June, is well enough to return soon to Yemen and will make a media appearance within the next couple of days.

Speculation about Saleh's health and the likelihood of his return to Yemen have been rife since he was hurt in a bomb blast on June 3 in a mosque in his presidential palace. He flew to Saudi Arabia for treatment, leaving behind a country on the verge of civil war.

The president has not been seen in public since the explosion, which killed several people and wounded the prime minister, two deputy prime ministers and the speakers of both parliamentary chambers. It is not clear what role if any Saleh, under pressure to step down, sees for himself in ruling Yemen.

"He will appear within the next 48 hours despite our fear that the burns on his features and on different parts of his body will be an obstacle given that his appearance will not be as the media expects it," said Ahmed al-Sufi, the President's media secretary.

Yemen has been rocked by months of protests against Saleh's three decades of rule. Before that he was grappling with a rebellion in the north, separatist violence in the south and a resurgent wing of al Qaeda.

Sufi said Saleh was in good health and continued to direct Yemeni affairs from abroad. Saleh's deputy Abd-Rabbu Mansour Hadi has been at the helm while the president recovers.

A source close to the president said Saleh's condition was good enough to allow him to travel to Yemen soon.

"The bomb in the mosque was in close proximity to the president when it went off. He was really lucky to get out," the source, who was with Saleh during the attack, told Reuters.

Saleh is suffering from burns but they cover less than 40 percent of his body, the source said, addressing reports in recent weeks about the extent of his injuries.

Yemeni officials previously accused an opposition tribal coalition of shelling the palace, which it denied.

ANTI-SALEH MARCH

Last week, a Western diplomat told Reuters Saleh was unlikely to return home soon, as Saudi Arabia and the United States continue to push for a transfer of power under an existing Gulf Arab proposal for a transition in Yemen.

They fear a power vacuum and tribal warfare will be exploited by the local wing of al Qaeda to launch attacks in the Gulf region and beyond.

Tens of thousands marched in Sanaa on Sunday to demand Saleh leave power, condemning the United States and Saudi Arabia for what they saw as a failure to take a strong stand against him.

"The position of the United States and Saudi Arabia is against our revolution ... We want a transition council to be set up and for the remainders of the regime to leave," said demonstrator Imar Naji, referring to Saleh's sons who hold top military and security posts.

The proposal by Gulf Arab neighbors calls for Saleh to hand power over to his deputy, Vice President Abd-Rabbu Mansour Hadi, who is acting president, as a step toward forming a new government and preparing for an election.

Ahmed Saleh, the president's son who heads the elite Republican Guards, said he backed Hadi's "efforts ... and meetings with opposition leaders and representatives of the international community to resolve the crisis..."

But he also voiced support for "constitutional legitimacy," terms often used by Saleh backers to justify his refusal to leave power, according to a statement on a Defense Ministry website.

Upon his return, President Saleh aims to propose two solutions, a source close to Saleh said.

"The first is to shift all power to the parliament and become just a figurehead," said the source. "The second will be to let a coalition government be formed and then hold early presidential elections and leave quietly."

VIOLENCE IN SOUTH

Underscoring the chaos in the country, especially in the south, an air raid on Saturday killed six militants on the outskirts of a village at the entrance to the volatile Abyan province.

A local official in Abyan told Reuters three soldiers were killed on Sunday in clashes with jihadist militants who took control of the province's capital Zinjibar in May.

Earlier, authorities detained the head of a prison and his deputy for questioning over the escape of 63 al Qaeda-affiliated inmates in the southern port city of al-Mukalla this week.

The jailbreak stoked fears militants are exploiting the unrest to gain a foothold in the impoverished state, from which they could launch attacks in the region and beyond.

Saleh's opponents say he is deliberately letting militants tighten their grip in the country to prove that only he stands in the way of an Islamist takeover.

In a sign of international unease, The U.N. Security Council voiced "grave concern" with the deteriorating security situation in Yemen, putting aside disagreements that had prevented the 15-nation body from speaking unanimously on the unrest there. (Additional reporting by Mohammed Mukhashaf in Aden and Mohammed Ghobari in Sanaa; writing by Isabel Coles; Editing by Ralph Boulton)

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