Hezbollah strikes at Israel

Israel shelled the area in retalation for the attack

One Israeli soldier has been killed and two wounded in an attack by Lebanese guerrillas in a disputed border area.

Sharon needs Knesset majority to take office

The Israeli army said an anti-tank missile had scored a direct hit on a vehicle in a military convoy near Shebaa farms, killing a 19-year-old conscript.

The attack, by the Shi'a group Hezbollah, was only the militants' second on an Israeli target in four months, and brought immediate shelling from the Israeli army in response.

The clash comes as Israeli Prime Minister-elect Ariel Sharon is said to be on the point of closing a deal with his defeated rival, Ehud Barak, to form a Likud-Labour unity coalition.

Lebanon, backed by Syria, claims sovereignty over the Shebaa area and argues that the Israeli withdrawal from southern Lebanon last May is therefore incomplete - a view disputed by the United Nations.

Unity amid violence

Under the deal, Mr Barak would become defence minister in a broad-based coalition, while the veteran Labour politician, Shimon Peres, would become foreign minister.

The one-colour government is not a coalition government. It is a government of generals who carry out aggression against our people

Palestinian spokesman Ahmed Abdel-Rahman

A Palestinian spokesman, however, said the "government of generals" promised only more aggression against his people.

In almost five months of violence about 400 people have been killed, including some 330 Palestinians and nearly 60 Israelis.

There were more clashes in the West Bank and Gaza Strip on Friday, which included fierce exchanges of fire near the town of Ramallah.

Suspected collaborators are sentenced to death

In other violence, the Palestinian security services said one of their officers, Anwar Mustafa Merhi, 33, had been killed in his home by suspected collaborators.

And in Lebanon's largest refugee camp, some 5,000 Palestinians marched in support of the killing of eight Israelis by a Palestinian bus driver earlier this week.

Opposing strategies

The Likud and Labour parties, Israel's two largest, have been at odds over how to make peace with the Palestinians.

The hawkish Mr Sharon, regarded with fear and suspicion by many Arabs, opposes territorial concessions offered by Mr Barak before the election.

But both sides have spoken of unity as a response to the violence which has mounted since Mr Sharon's landslide win.

Mr Peres could ease international concern

Observers say the Hezbollah attack and Wednesday's bus carnage in Tel Aviv are likely to spur Mr Sharon's efforts to put a government together quickly so that Israel can respond decisively.

The veteran right-winger, who cannot take office until he forges a majority coalition, has said a Likud-Labour pact would "enable us to reach security and peace".

BBC Middle East specialist Nick Childs says both sides stand to gain from a unity deal.

Mr Sharon might ease fears that he is an extremist by working with internationally respected Labour figures such as Mr Peres, a Nobel peace prize laureate.

Labour would gain continuing influence by being part of the government, although approval by the party membership is not certain.

Correspondents say Mr Barak's decision to join a coalition so soon after announcing his retirement from public life following the election defeat would be bound to anger many party colleagues and may even lead to a split.