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The government pledged to provide Gaza-area towns enduring a barrage of rocket fire with financial compensation and more shelters, the prime minister and defense minister announced during yesterday's cabinet meeting.

Defense Minister Amir Peretz declared an emergency situation in Sderot and other nearby communities. In addition, Prime Minister Ehud Olmert announced that Gaza-area communities will receive frontline status this week.

In addition to financial compensation, accelerated construction of reinforced rooms is set to begin, Olmert said.

Peretz's office said the decision to declare an emergency situation was made in light of the ongoing Qassam rocket fire from Gaza, which Peretz believes is likely to continue. The decision, which transfers powers from local governments to the military, covers Sderot, the Gaza envelope communities and four other moshavim - Ohad, Zohar, Sde Nitzan and Talmei Eliyahu.

In such a situation, defense forces are authorized to give all instructions necessary to protect and defend people or property in the area. A similar decision was made during the Second Lebanon War, although the government was criticized for waiting until day four of the hostilities to make the move.

"The conflict could continue for some time, and we need to change the situation of the Gaza-area communities," Peretz said after visiting Gaza division headquarters.

The injunction, under the 1951 civil defense act, transfers substantial powers to the military. Southern Command can decide if school will be held in these towns. The Home Front Command can close factories that have dangerous materials. Confinement orders can be issued for workers in critical services such as hospitals, bakeries, the Israel Electric Corporation and the local governments.

Olmert vowed that "the state will build 200 reinforced rooms per month, at a cost of hundreds of millions of shekels," Olmert said, pledging a minimum of bureaucracy in the process. In addition to the construction and property tax compensation, "every Sderot and Gaza-area child will be offered four weeks of summer camp sponsored by the state, and the state will subsidize tutoring in schools," he said.

Peretz told the cabinet he had ordered R&R breaks for Sderot residents at Soldier Welfare Society facilities in Netanya and Givat Olga. A few hundred residents have so far been evacuated to the two sites. They will stay there until after the Shavuot holiday, when a second R&R operation is scheduled to begin.

Peretz attacked businessman Arcadi Gaydamak and his work to evacuate Sderot.

"I am not competing with any billionaires," Peretz said. "That billionaire took 500 people and left them in Be'er Sheva. Now they are calling the Defense Ministry asking to be taken from there. We are finding them abandoned."

Olmert backed Peretz. "This is difficult for all of us cabinet ministers and our hearts are with Sderot, but it is not easy to be a defense minister from Sderot - living there while being identified as responsible for security solutions. Let's not envy Peretz. He sees these things with his own eyes."