"President Taylor needs to step down, so that his country can be spared further bloodshed," Bush said in Washington, announcing his policy towards Africa before he visits the continent early next month.

"All the parties in Liberia must pursue a comprehensive peace agreement and the United States is working with regional governments to support those negotiations and to map out a secure transition to elections," he said.

"We are determined to help the people of Liberia find the path to peace," Bush added.

Both government troops and fighters of the main rebel group, Liberians United for Reconciliation and Democracy (LURD), who have waged a bitter battle against Taylor's regime for four years, have vowed to fight to the death in Monrovia.

A week-old ceasefire signed in Ghana has been shattered by the latest clashes and Taylor's refusal to make way for a unity government that excludes him, in line with the truce.

Taylor, charged with war crimes by a UN court probing excesses during a barbaric 10-year civil war in Liberia's neighbour Sierra Leone, has said the indictment must be lifted if the peace talks in Ghana are to succeed.

He has vowed only to step down when his term expires in January and that the interim government will be headed by his deputy and led by Liberia's ruling party.

Liberian Health Minister Peter Coleman meanwhile said some 300 civilians had been killed in intense fighting in the capital and warned the skeletal health services in Monrovia needed urgent attention if more deaths were to be avoided.

Liberian Defence Minister Daniel Chea told AFP loyalist troops had pushed back rebels from Monrovia's port area to Duala, a nearby market area, but admitted that the going was tough for government soldiers.

"We are still on that campaign to clear out the rebels from Monrovia by today but we are coming under heavy mortar fire. We are trying to send our units from the rear to attack the rebels in Duala," he said.

Government officials Thursday claimed they had regained control over Clara Town and Vai Town, separated from central Monrovia by a narrow strip of water.

The city centre -- hit by rockets and a hail of bullets Wednesday -- was quiet. People were seen moving on the streets, but all the shops were closed.

A group of displaced people who had taken over an annex of the US embassy in Monrovia's plush Mamba Point quarter -- where rocket-propelled grenades on Wednesday killed between seven and 17 people according to varying accounts -- staged a brief protest Thursday at the American mission.

They laid the bodies of seven victims in front of the compound and demanded that Washington intervene more directly to end the war.

Amadou Massaquoi, a spokesman, said: "We want the American government to intervene because of the historic ties between the two countries and also because America is considered the policeman of the world now."

Liberia, Black Africa's first independent republic, was founded in the 19th century by freed American slaves.

Health Minister Coleman said a humanitarian crisis was looming in Monrovia, where tens of thousands are living rough amid an acute shortage of water, food and medicines.

Coleman said if something was not done "within the next 24-48 hours we will have a situation where people will just lie down and die."

Liberia has been wracked by almost uninterrupted war since the 1990s, fuelling chaos in west Africa with tens of thousands of refugees flocking to nearby countries for shelter, where their hosts struggle to feed them.

WAR.WIRE