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Frustrated by continuing rocket fire from Palestinian militants, Israel moved Wednesday to carve out a buffer zone in the northern Gaza Strip, firing a barrage of artillery shells and dropping leaflets that warned Palestinian residents to stay clear.

The worsening confrontation represented the latest setback to peace hopes in the wake of Israel’s landmark withdrawal of troops and Jewish settlers from Gaza over the summer. For many Israelis, the offensive brought back memories of the army’s costly effort to maintain a buffer zone in south Lebanon during the 1980s and 1990s to forestall rocket attacks against Israel’s northern communities.

As darkness fell Wednesday, the boom of Israeli artillery fire echoed across the farming fields and shantytowns of northern Gaza. A short time earlier, homemade rockets fired by Palestinian militants landed inside Israel. No casualties were immediately reported on either side.

Israeli politicians and military leaders said they hope to avoid an Israeli ground offensive in Gaza but emphasized that Palestinian rocket fire–even that involving homemade projectiles that rarely inflict casualties or cause serious damage–will not be tolerated.

With the establishment of a no-go zone in northern Gaza, “we have taken things a notch higher,” said Israeli Deputy Defense Minister Zeev Boim.

Palestinians condemned what they called a bid to reassert Israeli control over the impoverished coastal territory, home to more than 1.3 million Palestinians.

“Israel has left Gaza and doesn’t have any right to return,” Palestinian Authority President Mahmoud Abbas said in Gaza City. “They shouldn’t be looking for excuses.”

Since taking office nearly a year ago, Abbas has been struggling to cope with surging lawlessness in the Palestinian territories, particularly in Gaza. In a fresh sign of the continuing unrest, Palestinian police exchanged fire with scores of Fatah-affiliated gunmen who overran election offices in central and southern Gaza–a frequent occurrence in recent weeks–to demand that candidates they favored be allowed to run in Jan. 25 parliamentary elections.

Any outbreak of serious fighting in Gaza could cast a pall over not only the Palestinian vote but also over Israeli general elections scheduled to take place two months later.

Popular Prime Minister Ariel Sharon is seeking a third term, heading his newly formed party Kadima, which means “Forward.”

Israeli aircraft dropped leaflets over Gaza showing the boundaries of the no-go zone, roughly following the borders of the northernmost Jewish settlements that were uprooted over the summer. Israeli military officials also met with Palestinian counterparts to warn against any civilians straying into the mainly uninhabited area.

Separately, the Palestinians’ ruling Fatah Party overcame a split Wednesday that threatened to hand victory to Hamas militants in parliamentary elections next month, submitting a unified list of candidates, The Associated Press reported.

The dispute pitted Fatah veterans who entered the West Bank and Gaza in the mid-1990s with the late Yasser Arafat against younger leaders who grew up in the territories. Two weeks ago they submitted competing slates for the election.

The compromise list is headed by the most popular of the young leaders, Marwan Barghouti, who is serving five life terms in an Israeli prison for his part in deadly attacks. Veterans fill the next three slots.