Olmert Defends Attack on U.N. Gaza Compound

"And at the end of the day, even though we try to avoid civilian casualties, these things happen," she told reporters.

The Defense Ministry later toned down its comment in an official statement: "Defense Minister [Ehud] Barak made it clear that Hamas is using Palestinian civilians as human shields and is firing at IDF [Israel Defense Forces] soldiers from next to U.N. installations. IDF soldiers -- in self-defense -- have responded, and will respond, to any attempt to attack them."

Reports from inside Gaza, where Western media have officially been banned, describe chaotic scenes of heavy bombardment and clashes between Israeli ground troops and Hamas fighters in the Tel Hawwa neighborhood of Gaza City.

"The Israelis continue firing everywhere, using the tanks, using the heavy machine guns, so the situation is really very tough," said Sami Zayara, an ABC News producer who lives in Gaza.

The Al Quds hospital, which houses Gaza City's main ambulance depot, was reportedly also hit by Israeli artillery, as was a high-rise apartment block and a building housing journalists.

An aid worker from inside Gaza says that part of the Al Quds hospital is in flames and all the ambulances have been grounded.

"We've been speaking to paramedics both inside the Red Crescent and inside Al Quds hospital and they say they're getting emergency calls around Gaza that they can't respond to," Caoimhe Butterly of the Palestinian-led International Solidarity Movement told ABC news by phone.

According to Butterly, water shortages mean there is not enough to put out the fire inside the Al Quds hospital and emergency services cannot get anywhere near the building as it is surrounded by Israeli snipers.

Palestinian health workers approximate the total number of dead in the conflict as 1,066 and more than 4,700 wounded. Israel has so far lost 10 soldiers and three civilians in southern Israel have been killed by rocket attacks launched from Gaza.

The militants have kept up a steady albeit reduced barrage of rockets; on Wednesday night, 21 were fired. Reports today from Be'er Sheva indicate nine Israelis have been wounded; two seriously.

Today's fresh fighting and bombardment have caused hundreds in Gaza to flee their homes looking for protection while others cower inside fearing an Israeli assault.

"God help us, God help us. Where can we flee?" one woman told an Associated Press reporter. "All I want is to get my poor child away from here. We want to survive."

Meanwhile in Egypt negotiations are under way to end the fighting. Israel has sent its envoy senior defense official Amos Gilad to discuss the "parameters of the endgame" with the Egyptians. He will not be meeting Hamas envoys who are also in town. Israeli government spokesman Mark Regev says the ongoing discussions "look promising."

Part of the talks reportedly include working out an agreement for the U.S. to supply technical support to Israel to help curb the smuggling of weapons into Gaza.

Ban is also upbeat about these discussions. He believes some elements are in place for a cease-fire to come "reasonably soon."

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