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Transportation Minister Shaul Mofaz on Friday characterized the cabinet's decision to continue indirect cease-fire talks with Gaza as problematic, adding that Hamas should be asking Israel for calm rather than the other way around.

"We must act against terror through deterrence," Mofaz told Army Radio. "The Gaza regime is in the hands of terrorists who want to destroy us, and we want to ask them for calm? It should be the opposite."

The political-security cabinet decided earlier this week against launching a much-touted invasion of the Gaza Strip, in order to give Egyptian-brokered truce efforts more time to succeed. Still, the government said the Israel Defense Forces would continue its preparations in case the truce talks fail.

After a day of heavy shelling from Gaza on Thursday, defense officials said Israel would perservere with talks, but said the IDF may step up operations in response to the attacks.

The IDF has contingency plans to occupy large areas of the Gaza Strip, but the chances it would do so seem remote for now.

An Israeli woman was moderately wounded Thursday, when a barrage of some 50 Qassam rockets and mortar shells struck communities in the northern and western Negev. Ten Palestinians were killed in the Gaza Strip during the worst day of fighting in the region in over a month.

The intense shelling was assumed to be in reaction to an explosion in an apartment building in the town Beit Lahiya in the northern Strip on Thursday afternoon, which killed seven Palestinians and wounded dozens. Most of those killed were Hamas activists, and the two-story building and several other homes in the town were destroyed.

Hamas, which initially accused Israel of causing the explosion in the home of a bombmaker affiliated with the group, later toned down its accusations after Israel firmly denied any involvement in the incident. Israeli sources said the incident was probably caused by Palestinians preparing explosives. On Friday, Hamas admitted responsibility for the blast.

Shortly after the explosion on Thursday, dozens of mortar shells were fired toward Israel, particularly at the Erez crossing area and Moshav Netiv Haasara. A woman, 59, of Kibbutz Yad Mordechai, was moderately wounded.

Most of the rockets, however, fell in open fields near Kibbutz Nahal Oz, the greenhouses of Moshav Netiv Haasara and the Kibbutz Zikim area.

At the same time, Qassam rockets were fired toward Western Negev communities, and Grad rockets were fired at Ashkelon. One of the rockets landed near the city.

Despite a fire caused by the rockets, the alarm siren in Ashkelon was not activated. Sources in the Home Front Command said there was no need to operate the alarm because the rockets were not likely to reach the city.

The IDF retaliated with air strikes targeting rocket and mortar operating units in Gaza.

IDF foils major attack

Also Thursday, the IDF foiled a large-scale terror attack when Palestinian militants attempted to bring an apparently booby-trapped bulldozer close to the border fence.

Israeli soldiers fired anti-tank missiles at the bulldozer and stopped it. The militants jumped off and fled back to the Strip.

The IDF said that Gaza militants had been planning to use the heavy rocket and mortar barrage as a diversion while carrying out the attack with the bulldozer near the fence.

The IDF added that the Israel Air Force bombed the Palestinian mortar squad that fired on Kibbutz Nir Oz minutes earlier; they reported a direct hit.

Truce talks continue

Meanwhile, the Israeli envoy to the the indirect cease-fire talks - Defense Ministry official Amos Gilad - met Egyptian intelligence chief Omar Suleiman in Cairo on Thursday to discuss the truce initiative.

At the cabinet's request, Gilad asked the Egyptians to clarify the link between the cease-fire and the deal to release abducted soldier Gilad Shalit being con, and the Egyptians' own efforts to stop the arms smuggling from Sinai into the Gaza Strip.

The Egyptians said they were to hold talks with Hamas leaders before giving their answer, probably in the middle of next week.

Gilad told the Egyptians that the situation along the Gazan border was volatile and that Israel needed a quick answer on the agreement.

"The last round of fire on the communities demonstrates the gravity of the situation," a defense source told Haaretz. "Next week we'll get answers from Cairo and see if we are indeed heading toward a cease-fire."

The source said that the IDF has been instructed to prepare for intensified fighting. But other defense officials said Israel planned to make every effort to reach a cease-fire first, and is in no hurry to launch a large offensive in the Gaza Strip.