Masked gunmen vowed revenge on Monday at a rally staged amid the rubble of a Gaza Strip refugee camp devastated in an Israeli raid as tanks patrolled nearby.

"Dear Qassam, bomb Tel Aviv," some 1,000 demonstrators in the Rafah camp chanted, referring to the Hamas military wing. Several gunmen wore the Islamic group's colours and mock bomb belts.

As Rafah workers struggled to restore power after the three-day raid, Palestinian Prime Minister Ahmed Qurie convened his emergency cabinet in the West Bank amid international concern over divisions in the Palestinian leadership.

Tit-for-tat violence and Palestinian political infighting have combined to stall a US-backed "road map" charting the path to peace and creation of a Palestinian state by 2005.

The governor of Rafah in the southern Gaza Strip, a key militant stronghold, declared a "disaster area" and UN officials estimated 1,240 people had been left homeless in what Israel called a search for arms smuggling tunnels.

Israeli forces killed three Palestinian militants and five civilians, including an eight-year-old boy, in fighting that erupted on Friday with a largescale incursion by tanks and armoured bulldozers backed by helicopter gunships.

It was part of Israel's stepped-up military activity following a suicide bombing that killed 20 Israelis in the port city of Haifa on October 4.

Israel withdrew the bulk of its forces on Sunday from the Rafah refugee camp, on the border with Egypt, but tanks remained in positions on the edges of battered neighbourhoods as hundreds of residents began trickling back.

"I don't have a house, a bed or schoolbooks anymore," said 10-year-old Yasser Abu Swelen. His home was one of 114 that UN relief officials estimated had been flattened during the raid.

MAJOR SERVICES DISABLED

Work crews in the teeming cinderblock refugee camp of 70,000 inhabitants rushed to restore electricity, running water and telephone services knocked out by Israeli forces on Friday.

"The Israeli siege is blocking all our attempts to fix the infrastructure," said Majid al Agha, governor of Rafah.

Residents accused Israel of indiscriminate destruction amounting to collective punishment. Israeli officials denied such accusations.

An Israeli army spokesman said three tunnels used for smuggling weapons from Egypt had been found and destroyed and five structures used to hide tunnels or fire at troops were demolished.

Rafah has been a bastion of militants who rose up against Israel for statehood three years ago and they put up fierce resistance with grenade launchers and anti-tank rockets to the incursion, the deepest and longest into the camp for six months.

In the West Bank city of Ramallah, Qurie met his new ministers just a day after suggesting he would quit next month once his emergency government's 30-day period expires.

Qurie, sworn in by Arafat last Tuesday, has been at loggerheads with the Palestinian president over the choice of an interior minister who would hold security powers crucial to implementing the US-led peace plan.

According to Palestinian political sources, Arafat favoured longtime loyalist Hakam Balawi for the interim post. But Qurie was pushing for security veteran Nasser Youssef, who reportedly alienated Arafat last week by demanding greater reform powers. European Union foreign policy chief Javier Solana expressed concern it was taking so long to form a lasting cabinet.

"I am disappointed that we still have not seen a government that can take the full responsibility," he told reporters in Luxembourg. "I think the time it is taking is disproportionate.

"It is also disproportionate, the military action by the Israelis," he added, apparently referring to the Gaza raid.

With peace efforts stalled, a group of left-wing Israeli politicians and senior Palestinian officials said on Monday they had finalised a symbolic treaty hoped to lead to an accord.

Under the so-called "Geneva Agreement" Palestinians would found a state in much of the West Bank and Gaza, and there would be shared sovereignty in Jerusalem, media reports said.

Israeli officials denounced the initiative as a "virtual agreement" that aimed to undermine the elected government.

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