JERUSALEM - Israel warned Sunday there would be no progress in the peace process until the Palestinians crack down on militants, threatening to halt the planned release of 400 prisoners in the aftermath of a suicide bombing in Tel Aviv.
Prime Minister Ariel Sharon also pointed the finger of blame over Friday night's attack outside a karaoke bar at Syria, saying intelligence showed the bombing was planned and ordered by Damascus-based leaders of Islamic Jihad.
The increased tension was reflected on the ground as Israeli police forces were placed on high alert across the country to guard against new attacks.
"While Israel is interested in advancing towards a settlement with the Palestinians, there will be no diplomatic progress until the Palestinians take strong action to eliminate the terrorist organizations and their infrastructures," Sharon said at the weekly cabinet meeting.
The bombing outside The Stage nightclub was the first attack since Palestinian leader Mahmud Abbas declared a ceasefire at the Sharm el-Sheikh summit with Sharon on February 8.
Sharon, who also announced an end to Israeli military operations at the summit in Egypt, warned that the "self-restraint" would not continue unless there was firm action by Abbas's regime against groups such as Jihad.
"Recently, Israel has been showing restraint in order to facilitate progress. However, it is clear that if the Palestinians do not begin to take vigorous action against terrorism, Israel will be compelled to step up military activity that is designed to protect the lives of Israeli citizens."
The attack violated an informal truce which has been observed by Jihad and the other armed factions in recent months.
While the Gaza-based leadership of Jihad initially stressed that they remained fully committed to what they call a "quiet period", a tape of the bomber from the West Bank preparing for the attack was broadcast.
Israel released a first batch of 500 Palestinian prisoners last week as part of an agreement reached at the Sharon-Abbas summit.
But Justice Minister Tzipi Livni said plans to release another 400 could be halted unless Abbas moved against the factions.
"It was agreed (with the Palestinians) that the release of the 400 other prisoners would be linked with their action" against the militants, she told public television. "It's time we reminded them of that."
Defence Minister Shaul Mofaz told the cabinet that Israel had handed Abbas a list of militants it expected to be arrested.
As well as presssuring Abbas, Israel is also holding Syria responsible for the bombing, accusing it of aiding and abetting attacks by hosting the leaders of groups such as Islamic Jihad and Hamas.
"The orders came from Islamic Jihad elements in Syria. Even though we know this for a certainty, the fact is not enough to absolve the Palestinian Authority of its responsibility for the departure of the terrorist and of its obligation to act against his partners in crime," Sharon told his ministers.
Mofaz was quoted as telling the cabinet that Israel has proof of Syrian involvement in the bombing which it would pass on to international players in the peace process.
Syria, which is already suspected of having a hand in the February 14 assassination in Beirut of former Lebanese prime minister Rafiq Hariri, denied the charges.
"The Israeli charge is false and not based on any evidence," Syrian Foreign Minister Faruq al-Shara told reporters in Cairo.
Mofaz said in a statement that talks about a planned handover to the Palestinians of security control in some West Bank towns had been put on ice because of the attack.
Palestinian prime minister Ahmed Qorei, who has decided not to attend a Middle East conference opening in London on Tuesday so he could supervise security after the bombing, regretted the decision.
"If Israel wants to stop negotiations or connections with us, we won't shed any tears but there is an opportunity which began at Sharm el-Sheikh and we want to develop these efforts," he said.
The fallout from the bombing also led to the cancellation of upcoming talks in Cairo among the main Palestinian factions, including Jihad, that were scheduled to begin Saturday.
02/27/2005 16:59 GMT