It is the third reported Nato blunder in 26 hours. Yugoslavia said 17 people had died in an attack on a sanatorium and an old people's home in Surdilica, southeast Serbia, early on Monday morning.

It said a further 11 civilians had been killed in an attack on a bridge in Varvarin, south-central Serbia on Sunday afternoon. Nato has admitted bombing the bridge.

The BBC's Peter Hunt: Diplomatic efforts continue while the bombing goes on

The alliance continued its air campaign on Monday night. Eight missiles hit the industrial suburb of New Belgrade, cutting power to large parts of the capital.

As Nato planes flew over Serbia, a large force of Yugoslav tanks was reported to be approaching a section of the Albanian border where Kosovo Liberation Army guerrillas had been operating.

The BBC's Hugh Schofield in Brussels: "Missiles went astray"

The military action comes amid intensified diplomatic efforts to find a solution to the Kosovo conflict.

The special envoys of America, Russia and the European Union are due to meet in Germany on Tuesday to try to agree a common strategy on how to deal with Belgrade.

'Direct hit' on flats

John Simpson reports: "The bodies were still lying around when the camera teams arrived"

The Yugoslav state news agency Tanjug said 20 Nato missiles hit Novi Pazar, 300km south of Belgrade. The apartment building was reported to have taken a direct hit.

State television in Montenegro said the death toll could rise because more people were believed to be buried under the debris.

Tanjug said Nato's targets in the town included a publishing house, printing presses and regional television and radio headquarters close to a hospital and a bus station.

(Click here to see a map of latest Nato strikes)

Jamie Shea responds to journalists at a Nato briefing

Nato spokesman Jamie Shea described the bridge the alliance attacked in Varvarin as a "designated and legitimate target".

"There is always a cost to defeat an evil. It never comes free, unfortunately. But the cost of failure to defeat a great evil is far higher," he said.

He said any civilian deaths occurred because Nato had been forced into military action.

Nato has admitted bombing bridge in Varvarin

Witnesses said four cars fell into the River Velika Morava during the first wave of attacks on the bridge and rescuers who went to help victims were hit in a second round of bombings.

Tanjug news agency said the area would have been crowded with people attending the market at 1pm local time (1100GMT) on Sunday, the time of the attack.

Nato military spokesman General Konrad Freitag said alliance warplanes had successfully hit an ammunition storage depot and a military barracks in a raid on Surdulica.

Nato said it was investigating Yugoslav claims that civilians had died in the sanatorium and neighbouring old people's home.

The alliance said there was no evidence that a Nato plane had been involved in an attack on a car carrying foreign journalists in Kosovo on Sunday.

The driver of the car, who was an interpreter, was killed and one British, one French and one Italian journalist were reported to have been injured.

Serb tanks 'head for border'

News of the latest civilian casualties came as large numbers of Serbian tanks were reported to be approaching the Albanian border.

Jeremy Cooke reports: "The fighting threatens to spread into Albania itself"

Albanian police in the village of Krume, just a few kilometres from the frontier, said information about the tanks' progress came from KLA guerrillas, who had been operating in the area.

The UNHCR is evacuating refugees from camps in the area amid fears that they are in danger of being shelled by Serbian forces.

The reported tank movements followed heavy fighting between the KLA and Serbian forces on the Albanian border with Kosovo on Monday.

Milosevic peace move

On the diplomatic front there have been signs of increased optimism. EU foreign ministers have agreed that the EU special envoy, the Finnish president Martti Ahtisaari, should travel to Belgrade to meet Yugoslav President Slobodan Milosevic, possibly on Wednesday.

UK Foreign Secretary Robin Cook gave a cautious welcome to Mr Milosevic's statement confirming that he will accept the G8 principles for ending the Kosovo conflict. The US said it was not clear whether all the terms had been accepted.

Yugoslavia first accepted the G8 principles as a basis for negotiation some three weeks ago.

A BBC correspondent in Belgrade, Mike Williams, said it was perhaps significant that the announcement had finally come from the highest echelons of government.

For his part, US President Bill Clinton has urged Americans to support the Kosovo campaign.

• Albania warns of Serb tank advance
• Picture gallery: Nato destruction
• Conspiracy theories take shape
• Times reporter leaves hospital
• UK defends record on Kosovo refugees

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