Israeli Defence Minister Amir Peretz has authorised the army to carry out limited operations just inside the Gaza border against Palestinian militants, Defence Ministry sources said yesterday.

If carried out, Peretz?s order could mark an escalation in Israeli military activity. Israel and the Palestinians agreed to a shaky ceasefire in the Gaza Strip in November.

Some militant groups have continued to fire rockets into the Jewish state from Gaza despite the truce. Israel says it is exercising restraint but responded last week when ground forces fired on a rocket-launching squad near the border fence.

Defence Ministry sources said Peretz has given the Israeli military the authority to operate a small distance inside the Gaza border area when needed to stop militants from digging tunnels and placing explosive devices there. ?I know these are not easy questions placed before us: What is the meaning of the ceasefire? And what direction will we continue to assume?? Peretz said in broadcast remarks.

Israeli Prime Minister Ehud Olmert has played down the chances for now of launching any major Israeli offensive inside Gaza, though he has not ruled it out.