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Israel's concessions designed to calm Palestinian anger

Israel moved Wednesday to try to calm Palestinians' anger over the Gaza City bombing raid that killed 16 people, including a military leader of the Islamic organization Hamas and an estimated 10 children.

Israel said it would turn over about $45-million in frozen tax revenues to the Palestinian Authority, forgive some $31-million in Palestinian debt to Israeli utilities and expand Palestinian fishing rights in Gaza. The actions seemed designed to resume steps that Israel began Monday, before the Gaza bombing.

But Palestinian leaders said the efforts were not enough to soothe their outrage at Tuesday's attack, which killed the Hamas leader, Salah Shehada, his wife and his teenage daughter, and injured about 145 people. The body of a 4-year-old was pulled from the rubble Wednesday.

Before the bombing, Israeli Foreign Minister Shimon Peres had said Israeli troops might begin withdrawing from the West Bank. He also said Israel had issued 4,000 work permits to Palestinians to allow them to acquire jobs in Israel.

Tanzim, the Palestinian militia connected to Yasser Arafat's Fatah faction, was preparing to announce a unilateral cease-fire with Israel before an Israeli warplane dropped the 1-ton bomb early Tuesday on Shehada's home, Palestinian officials and Western diplomats said.

Israeli officials acknowledged that they knew of a possible cease-fire before the bomb was dropped, but dismissed it as a futile attempt by Palestinians without influence over terrorist groups.

Several Palestinian factions have vowed retaliation for the bombing.

In violence early today, one Israeli was killed and another seriously injured in a shooting attack in the West Bank, according to rescue services and the Israeli military. Gunmen, apparently Palestinians, opened fire on their car near the Jewish settlement of Elei Zahav, south of the Palestinian town of Qalqilya.

Because of that threat, the United States is urging Americans living in Israel "to exercise a high degree of caution.".

The Israelis defended the airstrike, even as they admitted intelligence surrounding the attack was flawed.

Peres said Prime Minister Ariel Sharon was "apparently not aware" that the bomb would explode in a densely populated area, or he would not have gone through with it.

"We shall investigate very clearly what went wrong and draw all the conclusions," Peres told the British Broadcasting Corp. "What happened is really regrettable. It wasn't done intentionally."

Israel has come under severe international criticism for the strike targeting Shehada's apartment building in a crowded residential neighborhood. President Bush criticized it as "heavy-handed."

Sharon praised the strike as "a great success," though he also said he regretted the deaths of innocents.

Amid the angry criticism, Sharon, Peres, Defense Minister Binyamin Ben-Eliezer and Finance Minister Silvan Shalom met to discuss resuming talks with the Palestinians and easing hardships in the Palestinian territories, Army Radio said.

Peres told reporters that the army still intended to withdraw from areas of Hebron and Bethlehem if they remained calm and if Palestinians assumed control.

He said the army would consider leaving Ramallah, where Arafat has been holed up in recent months, if there was a plan guaranteeing law and order there.

Palestinians were bitter over the attack.

Sharon "opened a big wound, and it's bleeding and it's painful," said Mahdi Abdul-Hadi, director of the Palestinian Academic Society for the Study of International Affairs, based in East Jerusalem.

_ Information from Knight Ridder Newspapers, the Associated Press, New York Times and Cox News Service was used in this report.