The head of the research division of Military Intelligence, Brigadier General Yossi Baidatz, told lawmakers Monday that Hezbollah is rebuilding its forces south of the Litani River in Lebanon, despite the presence of international peacekeepers in the area. (Click here for map)

Baidatz' remarks at a meeting of the Knesset Foreign Affairs and Defense Committee apparently contradict comments by Prime Minister Ehud Olmert at a speech to the Knesset last week, in which he said that "the situation in southern Lebanon has changed completely" since the summer 2006 war.

"Hezbollah continues to rehabilitate, from a military and a social perspective. It is acquiring a large number of weapons from Iran and Syria," Baidatz said.

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"It is preparing itself for possible conflict in the summer, but is not interested in this as it aspires to a period of calm in which to rehabilitate."

According to Baidatz, "Hamas is satisfied with the outcome of the current fighting against Israel, as it has resulted in the desertion of Israeli towns. They understand that Israel will not launch a deep ground incursion [into Gaza]."

Baidatz warned that Hamas is continuing with preparations for a major attack, and there have been many alerts over attempts to kidnap Israelis.

Defense Minister Amir Peretz said during the debate that Israel is operating in Gaza against every link in the chain of weaponry, including bureaus de change. He said that the attacks on the bureaus de change were more effective than those on military compounds.

Peretz added that the military action in northern Gaza against Qassam launchers is pushing those firing the rockets further south and keeping the projectiles from reaching Ashkelon.

MK Effi Eitam of the National Union-National Religious Party called during the meeting for the establishment of an emergency unity government for two years in order to deal with the strategic developments in the region.

Eitam said such a move was necessary as the weakness of the current government had made it difficult for the army to use its full power.