The security cabinet decided Wednesday against taking dramatic steps in the Gaza Strip to counter the Qassam rockets fired by Palestinian militants, opting instead to maintain its current policy of military deterrence.

The meeting came as the rocket fire on the western Negev continued, with one Qassam landing close to an elementary school shortly before the children arrived for the day.

Olmert even held consultations with Defense Minister Amir Peretz ahead of the cabinet session, in what was the first meeting between the two since a dispute broke out between them Sunday over Peretz's contacts with Palestinian Authority Chairman Mahmoud Abbas.

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Nevertheless, there was limited communication between the two during the cabinet meeting.

According to sources in Jerusalem, the Cabinet instructed the Israel Defense Forces to submit new proposals for military operations in the Strip. But no detailed plans for any major offensive were presented or discussed at the meeting, sources said. No vote was taken.

The sources said that the army would keep targeting rocket-launching squads and try to prevent the smuggling of weapons into the Gaza Strip from neighboring Egypt.

A Defense Ministry source said before the meeting ended that the cabinet was split between those pressing for a full-scale offensive in the Gaza Strip and other ministers seeking a political solution.

Partial reoccupation

On Tuesday, Peretz held a security briefing, and requested an examination of options for reoccupying areas of Gaza from which rockets are fired in order to distance the fire from Israeli communities.

Peretz would like to avoid a long-term presence in Gaza, and therefore instructed the IDF to come up with "creative solutions."

Political sources in Jerusalem said they do not believe a large-scale operation to reoccupy Gaza, similar to 2002's Operation Defensive Shield in the West Bank, will be approved in Wednesday's meeting. However, Olmert does expect to hear new operational plans from the IDF.

A political source said proposals for an international force in Gaza are "worth studying," as "only a diplomatic agreement ended the Katyusha fire from Lebanon."

Olmert told Italian Prime Minister Romano Prodi about two weeks ago that it was too early to determine the success of the Lebanon model, and there was no reason to deploy forces that would not prevent Qassam fire but would prevent Israel from responding.

Olmert also told Prodi there had been progress in talks with Palestinian Authority Chairman Mahmoud Abbas.

Olmert's aides Yoram Turbovitz and Shalom Turjeman were also to meet Wednesday with their Palestinian counterparts, Rafik Husseini and Saeb Erekat.

The Prime Minister's Office said Olmert has yet to decide whether to accept a proposal for strengthening the security forces loyal to Abbas.

Foreign Minister Tzipi Livni met Tuesday with British Prime Minister Tony Blair in London. The meeting focused primarily on the situation with the Palestinians.

Earlier, Livni met British Foreign Secretary Margaret Beckett, and told her the best way to strengthen Abbas is to demand that the new Palestinian government accept the international community's three requirements: recognition of Israel, rejection of violence, and acceptance of prior agreements.

During the meeting, Beckett raised the British proposal for constructing "governance ability" in the PA, in order to prepare it for future statehood.

Livni said Israel supports the plan in principle, but that currently a terror organization has gained control of the PA.

Livni and Becket agreed Syria is "not playing a positive role," and the foreign minister brought the wife and parents of captured IDF soldier Ehud Goldwasser to the meeting.