Israel on Thursday approved military steps to be taken against Islamic militant groups if the Palestinian government does not immediately crack down on the militants, Israeli security sources said.

An Ultra orthodox Jewish boy watches a crowd of people gather for the funeral of Menahem Lebel in Jerusalem August 20, 2003. Lebel was killed when a Palestinian suicide bomber blew himself up on a bus yesterday. Palestinian Prime Minister Mahmoud Abbas on Wednesday cut contacts with Islamic militants and vowed to crack down on them after 18 people were killed in the bomb attack.  [Reuters]

Prime Minister Ariel Sharon and his security cabinet, which met to discuss a suicide bus bombing that killed 18 people on Tuesday, confirmed they considered peace moves frozen unless the Palestinians begin the crack down.

"If the Palestinian government does not take all the steps necessary in the war on terror, actual and meaningful steps, it will not be possible to move to the stage of diplomatic discussion," Sharon's office said in a brief statement.

The statement did not say what steps Israel could take, but they were expected to include military raids to arrest or kill militants. A senior Israeli source said the raids could begin in a matter of hours and last several days.

The suicide bombing has left a three-month truce hanging in the balance and threatens the success a U.S.-backed peace "road map" which outlines reciprocal steps to end nearly three years of violence and establish a Palestinian state by 2005.

In an effort to stave off a tough Israeli response to the suicide attack, Palestinian Prime Minister Mahmoud Abbas cut off contacts with Islamic militant groups on Wednesday and ordered security forces to arrest those behind the bombing.

Abbas and his cabinet later met President Yasser Arafat and his Fatah group in the West Bank city of Ramallah. They vowed to enforce the rule of law and reiterated their commitment to the three-month truce announced by militants on June 29.

"Everyone should adhere to one authority and the rule of law," they said in a statement read out to reporters in Ramallah. "The security forces will be in charge of implementing the resolutions of the Palestinian cabinet."

U.S. TRIES TO SAVE ROAD MAP

The statement was unlikely to appease Israel or the United States, which was scrambling to salvage the road map.

The State Department sent a top envoy to meet both sides after Tuesday's bus bombing, and White House spokesman Scott McClellan said it was "important for all the parties to continue talking about the way forward."

But the White House said little to discourage Israel from retaliating militarily. It put the onus on the Palestinian Authority to rein in the militants and said Israel had the right to defend itself. Abbas says a crackdown would risk civil war.

President Bush conveyed his message directly to Sharon in a phone call from his Texas ranch, McClellan told reporters.

In the latest violence, Israeli soldiers shot dead a Palestinian teenager during a raid on the Tulkarm refugee camp in the West Bank on Wednesday, Palestinian witnesses said.

They said 16-year-old Islam Ghanem was hit by a bullet when gunfire broke out during the raid, intended to arrest militants.

Israeli military sources said the Palestinians had opened fire first. They did not confirm the death.

Peace efforts appear to be in deep trouble. The cease-fire is badly frayed after the suicide bombing and two other suicide attacks last week which followed fatal Israeli military raids.

Israel has shelved its planned handover of occupied West Bank cities, frozen high-level talks and reimposed a clampdown on the West Bank and Gaza Strip.

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