Cathy Jenkins: "The fighter jet circled and then dropped its bombs"

However, the President of Eritrea, Isayas Afewerki, said earlier he saw no chance of a ceasefire. He also appeared to reject mediation by the United Nations and the United States.

The comments followed bombing raids by the Ethiopian Air Force on the Eritrean capital, Asmara.

The Ethiopian Prime Minister, Meles Zenawi, said proposals drawn up by African foreign ministers were acceptable but that the Eritreans were prevaricating.

The deal includes a ceasefire, demilitarisation of the war zone and arbitration on where the border should be.

Mr Afewerki said the fighting on the ground at the border was of much greater magnitude than the air attacks. However, he did not rule out further action by Eritrea.

President Afewerki said: "What matters here is do we have to be drifted by situation ... or do we have to seriously commit ourselves to restraint?

President Isayas Afewerki: "I have not given any instructions for the air force to fly."

"I don't think this escalation has changed much the situation ... we would like to wait and see developments and when there is a need for taking action, definitely we'll take action as a deterrent to escalation, as a deterrent to using force and impose any kind of condition."

At least one Ethiopian plane resumed bombing raids after daybreak. The plane was shot down - the second to be lost by Ethiopia - and the pilot captured.

The BBC correspondent in Asmara, Cathy Jenkins, said the Ethiopian attack came just as the Eritrean president was due to address journalists to explain the Eritrean position.

Both sides blame each other for the conflict

An Ethiopian fighter plane flew once over the airport as anti-aircraft fire rang out. The jet then circled and returned to drop its cargo of bombs.

One bomb hit the military airport which is next to the civilian complex. A huge plume of dense smoke rose from the compound. There was a noise of secondary explosions.

Civilians ran down the street away from the scene of the attack whilst ambulances and fire engines rushed towards it.

Our correspondent said there has been no information yet as to whether there were casualties. Eritrean troops quickly blocked the road to the military site and turned on-lookers away.

Previous attacks

Air raid warnings herald the bomb attack on Asmara

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

Ethiopian planes twice attacked Asmara. Casualties were lighter, with reports of one person killed. The targets included the city's international and military airports. One Ethiopian jet was shot down.

'No change'

The latest attacks came despite an urgent appeal for both sides to stop fighting from the UN Secretary General, Kofi Annan.

Before news of the latest air raid Mr Annan said he was encouraged by indications that both countries might agree to a peace plan put forward jointly by the US and Rwanda.

However, our correspondent said that although the international community is pleading for restraint, it looks as if neither side is prepared to back down.

She said that in the Eritrean capital there is little information being given out about Eritrean air-raids over Ethiopia.