Mr Annan said he was encouraged by indications that both countries might agree to a peace plan put forward jointly by the United States and Rwanda.

The four point plan calls for:

• The withdrawal of troops
• Deployment of observers
• Return of civilian authorities to the disputed areas
• An investigation into the root causes of the crisis

A UN statement said: "The secretary-general strongly appeals to both sides for an immediate cessation on hostilities so as to give diplomacy a chance to bridge remaining differences and to avoid any further escalation."

African ministers urge agreement

African Foreign Ministers, meeting in Burkina Faso ahead of next week's Organisation of African Unity summit, also urged both countries to agree to a cease-fire and accept the four-point plan.

BBC correspondent Cathy Jenkins in Asmara: 'Condemnation has been swift'

The Ethiopian and Eritrean Foreign Ministers, who both attended the meeting, said they had agreed to back the call.

The ministers also promised to back a call for "a cessation of hostilities" but it was not immediately clear what impact the call would have on the two governments and the fighting on the ground.

The African neighbours have disagreed over a 155-square-mile triangle of land on their border for many years but the dispute erupted into violence on May 6 with both sides accusing the other of invading.

On Friday, Eritrean planes attacked the Ethiopian town of Mekele, reportedly killing 40 people. Ten of the dead were children.

US nationals make their escape

Ethiopian planes twice attacked the Eritrean capital, Asmara. Casualties were lighter with reports of one person killed. One Ethiopian jet was shot down.

The US State Department condemned Friday's air raids, saying they had sharply escalated the conflict.

Spokesman James Rubin said: "We call on both Ethiopia and Eritrea to cease all hostilities while facilitators seek a peaceful resolution to the dispute."

Foreign nationals 'endangered'

The US also protested over the attacks on the Asmara airport saying that foreign nationals trying to flee had been endangered.

However, a plane organised by the US Government took nearly 200 people, mostly Americans, out of the region late on Friday.