"The army will not negotiate with the militants,'' Defense Minister Elias Murr said in a telephone interview. "They have two choices: Either surrender or expect an attack.'' 

The group is a danger "not only to the camp and Lebanon, but to the entire Arab world, and we have a plan in place to deal with it,'' Murr said. 

The fighting in the Nahr al-Bared Palestinian refugee camp, which included heavy shelling, has left scores of dead and wounded in the past three days. More than 15,000 camp residents have fled to safer areas since the fighting began, the news agency said. 

"We have all the authority to take any measures we see necessary to resolve the situation,'' said Lebanese army Brigadier Saleh Haj Suleiman when asked whether the army would launch an attack to defeat the group. 

Hezbollah Reaction 

The Shiite Muslim group Hezbollah described the clashes, which broke out May 20, as an "American project'' to create chaos in Lebanon. "Hezbollah has always been in support of the army to be the leader in protecting the country,'' it said in a statement. 

The 1975-1990 civil war pitted Lebanese against each other and against Palestinians. Lebanese politicians and U.S. officials accuse neighboring Syria, whose army left Lebanon in 2005, of sparking the new bloodshed. 

"Everything Syria is doing is aimed at complicating the situation and returning Lebanon to a state of war,'' Samir Geagea, leader of the Lebanese Forces, a Christian group, said at a press conference. Syria denies the allegation and says it has jailed leaders of the militant group. 

Both the army and Fatah al-Islam, a Palestinian group with links to al-Qaeda, said the army hadn't entered the camp. 

The group threatened to take the fight outside the camp if the situation isn't resolved. 

"The number of fighters is not significant and we have various scenarios in mind,'' Abu Salim Taha, a spokesman for Fatah al-Islam, said in a telephone interview. 

'Indiscriminate' Shelling 

Human Rights Watch said yesterday the army was indiscriminately shelling densely populated areas of the camp using tanks and mortars, while militants sheltering within the perimeter fired rocket-propelled grenades at military posts. The camp is home to more than 30,000 Palestinian refugees. 

The United Nations yesterday demanded aid workers be given safe passage to evacuate the dead and wounded. 

The Lebanese army and the Fatah al-Islam group must "do their utmost to avoid further bloodshed,'' UN Secretary-General Ban Ki-moon's office said in a statement yesterday. 

French Foreign Minister Bernard Kouchner will fly to Beirut tomorrow for two days of talks with Prime Minister Fouad Siniora and other Lebanese leaders at the request of President Nicolas Sarkozy to underline the importance France attaches to "the independence, sovereignty and stability'' of Lebanon, Kouchner's office said in a faxed statement. 

Lebanese government bonds declined. The 7.375 percent international bond maturing April 2014 dropped for a second day, sending the yield up 2 basis points to 8.72 percent, near its highest this year. The price of the security fell 0.10 to 93.13, according to prices compiled by Bloomberg. Bond yields move inversely to prices. 

Hariri Tribunal 

While all major political parties in Lebanon, including those allied with Syria, said they supported the Lebanese army and condemned Fatah al-Islam, the violence may be an attempt by Syria to put pressure on the Lebanese government, analysts and Lebanese government members said. 

White House spokesman Tony Snow said the violence was aimed in part at distracting attention from efforts to form a UN- backed tribunal to try suspects in deadly attacks on Lebanese politicians, including the killing of former Prime Minister Rafiq Hariri in 2005. 

"We will not tolerate attempts by Syria, terrorist groups or any others to delay or derail Lebanon's efforts to solidify its sovereignty or to seek justice in the Hariri case,'' Snow said in Washington. 

Syria and its Lebanese allies, such as Hezbollah and Christian General Michel Aoun, oppose the tribunal. Hezbollah was in a monthlong conflict with Israeli forces last year. 

Syria Accused 

Walid Jumblatt, political leader of Lebanon's Druze minority and a supporter of Siniora, blamed Syria for the unsettling events in Lebanon. 

"The Syrians are using Fatah al-Islam who are using the same methods used in Iraq,'' he said in a telephone interview. 

The fighting between the army and Fatah al-Islam has resulted in the deaths of at least 70 people, including 30 soldiers, in the past three days, according to reports by the news agency and the Lebanese army. 

The U.S. State Department's report on terrorism for 2006 describes Fatah al-Islam as linked to al-Qaeda and says the Palestinian refugee camps in Lebanon have become "safe havens'' for the group.