DEADLINE PASSES; "LONG WAR" LOOMS

Israel warns of "long war" over soldier

GAZA (Reuters) - Israel warned the governing Palestinian faction Hamas that the "sky will fall on them" if they harm a captured soldier after a deadline passed on Tuesday for the Jewish state to accept a prisoner exchange.

 Israeli tanks and infantry massed along the Gaza Strip's northern border for a threatened ground incursion, Prime Minister Ehud Olmert said the campaign to free Corporal Gilad Shalit could turn into "a long war." Three Palestinian factions, among them the Hamas armed wing, pulled out of negotiations with Egyptian mediators trying to end the standoff over Shalit, a Hamas political leader said.

Israel rejected a 6 a.m. (0300 GMT) ultimatum set by the factions, which demanded that the Jewish state free 1,000 prisoners. Unless the demands were met, the factions said, "the enemy will bear full responsibility for future consequences." Olmert said Israel would not negotiate with the militants, and the Maariv newspaper reported the government had given the army a green light to launch a deeper incursion into northern Gaza, though there was no indication when it might begin. "This is a long war," Olmert said. "It requires lots of patience, sometimes endless restraint. We have to know when to clench our teeth and to deal a decisive blow."

Washington has been urging Olmert to show restraint and take steps to minimize civilian casualties. Hamas accused Israel of trying to topple its three-month-old government, which the Jewish state and Western powers have pushed to the brink of financial collapse by cutting off aid.

The smallest of the three militant groups, the previously unknown Islamic Army, said there would be no further information released on 19-year-old Shalit, who was seized in a cross-border raid on June 25. They sent conflicting signals about his fate. "Whether he will be killed or not killed, we will not disclose any information ... Discussion is closed," said Islamic Army spokesman Abu al-Muthana. But he later said: "We do not kill captives. Our Islam requires that we treat captives well and fairly." He declined to say whether Shalit was alive or dead.

Osama al-Muzaini, a Hamas political leader, said the militant groups have withdrawn their representatives from the talks with the Egyptian mediators. He compared the fate of Shalit to that of Israeli airman Ron Arad, who has been missing since bailing out of his plane over southern Lebanon 20 years ago. There has been growing speculation Arad is dead. "They (the militant factions) may kill him (Shalit), take him to another country or may hide him. All options are open," al-Muzaini said.