BBC Jerusalem Correspondent Lyse Doucet: Hezbollah intent on ejecting Israelis from Lebanon

Mr Netanyahu, speaking as he toured the area hit in the attacks, said that Israel could not remain silent and would respond in its own time.

Hezbollah launched dozens of rockets at the northern Israeli town of Kiryat Shmona early on Wednesday.

At least one building was heavily damaged and several people were injured. Other rockets fell on western Galilee.

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During Wednesday, Israeli forces returned artillery fire against Hezbollah.

The spate of exchanges was prompted by an Israeli air raid which left a Lebanese woman and six children dead.

Israel apologised for that attack, intended for a reported Hezbollah training camp, describing the incident as a "fatal error". Hundreds of mourners were reported shouting anti-Israeli slogans at the funerals.

'We will react'

Speaking in Kiryat Shemona after an emergency meeting of the security cabinet, Mr Netanyahu said: "We can't let this pass quietly. We will react according to our considerations, when we want. And we will react."

Flanked by ministers, Mr Netanyahu toured the damage caused by the rocket attacks.

Defence Minister Yitzhak Mordechai said that Israel's fatal attack was completely different to a rocket attack.

"We are sorry about what happened and we apologised," said Mr Mordechai, who had already told Lebanon and its ally Syria that Israel was not seeking further confrontation.

"But the Hezbollah attack was aimed at intentionally killing children on their way to school."

Both Israel and Hezbollah say they do not want to see an escalation of violence in the politically-sensitive border region.

There is also an on-going campaign in Israel to withdraw troops from a security buffer separating the two countries.

Israel's self-declared security zone, which is between 10 and 15km wide, has straddled the border with Lebanon since 1985.

Israel says it needs the zone to protect its territory from Hezbollah attacks.

In an interview with Qatari satellite television, the assistant Secretary-General of Hezbollah, Shaykh Na'im al-Qasim, said: "We carried out these attacks in response to the killing of civilians.

"We believe that Israel must pay a price every time it carries out such an action."