Prime Minister Fuad Siniora on Thursday denounced what he called Israel's violation of the Lebanese border, saying Israeli troops crossed the internationally-recognized border prior to the first exchange of fire between the two countries' forces since just after last year's war between Hezbollah and Israel.

Siniora discussed the border clash with UN envoy Geir Pedersen, telling him that his government condemned what he described as the new Israeli aggression on Lebanon's sovereignty and what he called the violation of the Blue Line, the UN-recognized border between the two countries.

Liam McDowell, a spokesman for the UN Interim Force in Lebanon, or UNIFIL, said the exchange was initiated by the Lebanese army and that the Israeli bulldozer had crossed the border fence, but not the Blue Line, to clear mines.

The border fence lies several dozen meters south of the Blue Line.

Speaking to Pedersen in front of reporters, Siniora said the incursion compounded the daily violations of Lebanese sovereignty by Israeli aircraft.

On Thursday morning, Israel Air Force planes flew twice over southern Lebanon.

The IDF confirmed the overflights, saying: The incident yesterday hasn't led us to change our aerial activity.

Defense Minister Amir Peretz said Thursday that Israel does not seek an escalation along the border with Lebanon, but stressed that the Israel Defense Forces will return fire when fired upon.

Peretz made the comments following special security consulatations on the situation in the north in the wake of the exchange of fire between IDF and Lebanese Army troops late Wednesday night.

Meeting with Chief of Staff Dan Halutz and senior IDF officials, Peretz said that the "Northern Command operated according to regulations and in the necessary and correct manner, in keeping with UN Security Council Resolution 1701."

"We have no intentions of escalation, but wherever there is fire endangering IDF forces we will have to react," he said. "UNIFIL forces and the Lebanese Army are fulfilling their roles, and we intend to continue to operate within the political and regulatory framework established in recent months."

Peretz added that "there is no intention of returning to the policy of looking the other way on Lebanon."

An IDF tank on Wednesday night fired two rounds at the Lebanese Army - at an outpost and an armored vehicle - close to the community of Avivim, along the border fence, in response to gunfire targeting IDF troops operating in a salient inside Israeli territory.

This was the most serious incident of its kind since the end of the second Lebanon war on August 14 and the deployment of Lebanese Army troops in the area as part of a United Nations-brokered cease-fire.

The IDF suffered no casualties, while UNIFIL reported that five Lebanese soldiers were wounded in the incident. The Lebanese Army has denied it suffered any casualties.

The incident followed a day of tension, as IDF troops entered the area between the fence and the internationally-recognized border with several bulldozers, in order to search for explosive devices Hezbollah planted there.

Earlier this week, four explosive devices were discovered in the area. IDF sappers detonated them from a distance.

The IDF carried out yesterday's operation after informing UNIFIL and the Lebanese Army of its intentions.

In response, the Lebanese Army warned the IDF that if its forces violated Lebanese sovereignty, it would open fire.

The IDF said that it did not intend to cross into Lebanese territory, but if its forces were attacked, it would respond.

Israel rejected Lebanese claims that it had violated Lebanese sovereignty, saying that the force was south of the international border - inside Israel - as delineated by the United Nations following the IDF pullout from southern Lebanon in May 2000. In some places, the border and the fence are several dozen meters apart.

Lebanese officials said an IDF bulldozer crossed the international border and entered about 18 meters into Lebanon.

A spokesman for UNIFIL, however, confirmed the exchange was initiated by the Lebanese Army after an IDF bulldozer crossed the border fence "in an apparent attempt to clear mines between the Blue Line (international border) and the fence."

"We characterise this as a serious incident between the Lebanese Army and the IDF," the spokesman said.

The IDF operation in the area caused grave concern on the Lebanese side, and drew the attention of the Lebanese Army.

Israel imposed a local media blackout, which was lifted as soon as Hezbollah's Al-Manar went on the air with information about the operation. Al-Manar gave the operation a great deal of coverage, reporting that an Israeli armored column tried to cross into Lebanon close to Maroun al-Ras, which is across from Avivim.

The report stated that UNIFIL and a Lebanese Army officer held discussions with Israel, after which Israel agreed to cancel the mission.

The Lebanese News Agency reported that the Lebanese Army placed forces deployed near Maroun al-Ras on alert, fearing that the IDF planned to broaden its operation. It was also reported that IDF helicopters flew over southern Lebanon villages.

The IDF Northern Command was unable to confirm whether the explosive devices had been placed recently. Hezbollah, for its part, denied Tuesday that these were new bombs, saying they had been placed before the war in July.

A GOC Northern Command officer said yesterday that Hezbollah is still operating in southern Lebanon, but is keeping a low profile - its operatives avoid public displays of weapons, and wear civilian clothes.

Northern Command sources report that Hezbollah is working hard to replenish its ranks, sending conscripts for training in the Beka'a, in order to make up for its losses during the war.

The officer said there has been a growing presence of Islamic Jihad militants in southern Lebanon, as well as extremists affiliated with Al-Qaida and Sunni groups. These groups are seeking to challenge Hezbollah's hegemony in the area.

The IDF officer said the army intends to clear all salients between the border and the fence of explosives.

"Our way of thinking has changed," the officer said. "Before the war, the approach was that confrontation was bad for us, and therefore we kept away from the fence. Now the approach is that we will operate up to the Blue Line [the international border] and if the other side seeks a confrontation, it will get it," the officer said.

This is not the first time the IDF has operated north of the border fence.

Following the army's withdrawal from south Lebanon in 2000, the fence was redrawn. At several points its path was routed south of the border, as far as 100 meters in, in what the army cited as strategic considerations.

In searches conducted in recent months along the fence, IDF troops have discovered Hezbollah positions and equipment which appear to have been used in the abduction of two IDF soldiers in July 2006.

About two weeks ago, IDF troops destroyed two Hezbollah bunkers uncovered during searches of the area around the border fence. One of the bunkers was found during the war, and the other was uncovered last month.

Both bunkers were within Israel's territory, somewhere between the international border and the border fence. The bunkers housed supplies, food and tools that would enable a long stay underground.

'Syria rearming Hezbollah'

Defense Minister Amir Peretz on Wednesday accused Syria of allowing the rearmament of Hezbollah guerrillas in Lebanon and said Israel has the right to act forcefully against the Shiite militia to counter the threat.

Speaking to visiting U.S. Jewish leaders, Peretz said Syria, Hezbollah's main ally, is continuing to allow weapons shipments to the group to cross its border with Lebanon.

"We can't under any circumstances ignore the transfer of weapons and ammunition to Hezbollah," Peretz said. "While Israel remains committed to the cease-fire we reserve the right to protect the citizens of the State of Israel and we will do this forcefully without any compromises."

In Beirut, a Hezbollah official declined comment.

About two weeks ago, IDF troops destroyed two Hezbollah bunkers uncovered during searches of the area around the border fence. One of the bunkers was found during the war, and the other was uncovered last month.

Both bunkers were within Israel's territory, somewhere between the international border and the border fence. The bunkers housed supplies, food and tools that would enable a long stay underground.