Meanwhile, Palestinian prime minister Ahmed Qorei made a ceasefire with Israel the top priority of his new government as his emergency cabinet prepared to hold its first session.

"Israel will continue to defend its citizens and we will not hesitate to strike our enemies in any place and any method," Sharon said in his first declaration since the Israeli Air Force bombed a suspected training camp for Palestinian militants near Damascus on Sunday.

"But at the same time we will not pass up any opportunity for peace with our neighbours," he said at a ceremony in west Jerusalem to mark the 30th anniversary of the Yom Kippur War with Syria and Egypt.

"The battle continues ... this generation will steadfastly continue with the fight against the terrorist organisations as the thirst for blood has no limits as we saw again last Saturday," Sharon said, referring to a weekend suicide attack in the northern city of Haifa that left 19 dead as well as the bomber.

In an interview published by the pan-Arab daily Al-Hayat Tuesday Syrian President Bashar al-Assad accused Sharon of trying to drag Syria into war.

"The government of Ariel Sharon wants to drag Syria and the rest of the region into war," Assad said in his first public statement since the airstrike.

Israel struck in reaction to the Haifa attack, claiming the base was used to train fighters from Islamic Jihad -- the group behind the bombing. Both Syria and Islamic Jihad denied it existed.

Tensions in the Middle East have been further heightened after an Israeli soldier and a Lebanese child were killed in firing across their border.

Responsibility for the deaths was not immediately clear, as Lebanon's Hezbollah guerrillas denied shooting an Israeli soldier on border patrol Monday, and Israel said it had not fired into the area where Ali Nader Yassin was killed and his brother Ahmed, aged eight, was wounded in the head.

Lebanese police said an Israeli shell had hit the boys' home in the village of Houla, five kilometres (three miles) from the border. Its target was apparently a Hezbollah anti-aircraft battery which had fired at Israeli helicopters violating Lebanese airspace.

Funerals for 12 of the victims of the Haifa attack were due to take place Tuesday.

Retired navy admiral Zeev Almog was due to be buried in Haifa along with his wife, son and two grandsons. And in the nearby kibbutz of Yagur, five members of the Zer-Aviv family, whose ages ranged from 14 months to 59, were also being laid to rest.

The escalating crisis prompted Palestinian leader Yasser Arafat to declare Qorei the head of a nine-member cabinet late Sunday in a decree that also ushered in a state of emergency. The cabinet was due to hold its first meeting in the West Bank town of Ramallah on Tuesday.

Asked about his top priorities ahead of the meeting, Qorei told AFP: "Trying to reach a mutual ceasefire with the Israeli side."

The outgoing speaker of parliament also said that he wanted to "establish an intra-Palestinian dialogue more serious than anytime before in order to reach a common ground on the way of ending the present crisis."

Sources close to Qorei had said on Monday the government would move against hardline factions such as Hamas and Islamic Jihad, but Qorei is also determined to avoid any descent into a civil war among Palestinian ranks.

"We will not be pushed into a civil war and this is a promise to our people," he told the Palestinian Al-Ayyam newspaper.

"But we will not be lenient in imposing the law and order and the respect of our commitments."

Israel has been reluctant to embrace appeals for a ceasefire, with a recent offer by Arafat dimissed as a "honeytrap" by Sharon's spokesman.

In the absence of what it sees as action against the factions from the Palestinians, Israel is pursuing its own campaign.

An army spokesman said Israeli troops captured 31 suspected Palestinian militants overnight in a sweep of the northern West Bank city of Jenin.

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