Obama urges restraint in tense Asian disputes

PHNOM PENH (Reuters) - President Barack Obama urged Asian leaders on Tuesday to rein in tensions in the South China Sea and other disputed territory, but stopped short of firmly backing allies Japan, the Philippines and Vietnam in their disputes with China.

The comments illustrate the challenge facing newly re-elected Obama in managing Sino-U.S. ties that have become more fraught across a range of issues, including trade, commercial espionage and the territorial disputes between Beijing and Washington's Asian allies.

"President Obama's message is there needs to be a reduction of the tensions," Deputy National Security Adviser Ben Rhodes said after the East Asia Summit in the Cambodian capital Phnom Penh. "There is no reason to risk any potential escalation, particularly when you have two of the world's largest economies - China and Japan - associated with some of those disputes."

The comments appeared carefully calibrated not to offend either side.

They follow a three-day trip by Obama to three strategically important Southeast Asian countries: old U.S. ally Thailand, new friend Myanmar and China ally Cambodia, in a visit that underlines Washington's expanding military and economic interests in Asia under last year's so-called "pivot" from conflicts in the Middle East and Afghanistan.

Obama's attention was divided as he tried to stay on top of the unfolding crisis in Gaza. He dispatched Secretary of State Hillary Clinton from the summit to the Middle East for a round of troubleshooting talks in Israel, the West Bank and Egypt.

A decades-old territorial squabble over the South China Sea is entering a new and more contentious chapter, as claimant nations search deeper into disputed waters for energy supplies while building up their navies and military alliances with other nations, particularly with the United States.

Beijing claims almost the entire sea as its territory based on historical records, setting it directly against U.S. allies Vietnam and the Philippines, while Brunei, Taiwan and Malaysia also lay claim to parts.

PHILIPPINE PROTEST

The Philippines lodged a formal protest on Tuesday against summit host Cambodia, accusing the Chinese ally of trying to stifle discussions on the South China Sea when leaders of the Association of Southeast Asian Nations (ASEAN) met on Monday.

On Tuesday, China defended its stand to not discuss the South China Sea issue at multilateral forums. Beijing prefers to deal with other claimants on a bilateral basis.

"We do not want to bring the disputes to an occasion like this," Chinese Premier Wen Jiabao told the summit, according to Chinese Deputy Foreign Minister Fu Ying.

"We do not want to give over emphasis to the territorial disputes and differences, and we don't think it's a good idea to spread a sense of tension in this region," Wen added.

Several leaders at the summit raised the South China Sea issue, including a dispute over Scarborough Shoal, where Philippine and Chinese ships faced off in April. That prompted a firm response from China, Fu told reporters.

"Huangyan Island (Scarborough Shoal) is China's territory," Fu quoted Wen as telling the summit. "China's act of defending its sovereignty is necessary and legitimate."

The South China Sea failed to earn a single mention in an 11-page concluding summit statement read by Cambodian Prime Minister Hun Sen, a victory for China, which has sought to keep it off the formal agenda.

Hun Sen lived up to his authoritarian image, taking no questions in a 29-minute news conference. He said he was too tired.

Earlier, in his first meeting with a Chinese leader since his re-election, Obama said Washington and its chief economic rival must work together to "establish clear rules of the road" for trade and investment. But he stopped short of accusing China of violating those rules, a hot topic in his re-election campaign.

"I'm committed to working with China and I'm committed to working with Asia," Obama told Wen in a bilateral meeting. Wen highlighted "the differences and disagreements between us" but said these could be resolved through trade and investment.

Japanese Prime Minister Yoshihiko Noda said mounting Asian security problems raise the importance of the U.S.-Japan alliance, a veiled reference to tensions over Chinese sovereignty claims and maritime disputes.

"With the increasing severity of the security environment in East Asia, the importance of the Japan-U.S. alliance is increasing," Noda told Obama.

STRAINED TIES

Sino-Japanese relations are also under strain after the Japanese government bought disputed islands known as Senkaku in Japan and Diaoyu in China from a private Japanese owner in September, triggering violent protests and calls for boycotts of Japanese products across China.

China says both disputes involve sea lanes vital for its economy and prefers to address conflicts in one-on-one talks.

Hun Sen said on Sunday Southeast Asian leaders agreed not to internationalize the row over the South China Sea and to confine talks to between ASEAN and China -- a claim disputed by Philippine President Benigno Aquino.

A stern-faced Philippine Foreign Minister Albert del Rosario said his delegation had been shocked when a Cambodian official told a news conference that ASEAN leaders had reached a consensus at their summit on Sunday.

"Consensus means everybody. I was there, the president (Aquino) was there and we're saying we're not with it because there's no consensus," del Rosario told reporters. "How can they say there's consensus when we're saying there's no consensus?"

It was the second time in five months Cambodia was accused of bowing to Chinese pressure and thwarting regional debate on the issue. A July ASEAN foreign ministers meeting, also in Phnom Penh, broke down in acrimony and failed to agree on a communique for the first time, just weeks after the standoff between a Philippine warship and Chinese vessels.

(Additional reporting by Matt Spetalnick, Stuart Grudgings, Prak Chan Thul and Manuel Mogato. Writing by Jason Szep.; Editing by Ron Popeski)

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Attacker stabs guard at U.S. embassy

TEL AVIV (Reuters) - A man apparently suffering from mental health problems stabbed a security guard at the U.S. embassy in Tel Aviv on Tuesday and was apprehended, police said.

"A Mazda car stopped next to the U.S. embassy and a man got out carrying a red bag and a pitchfork," said David Cohen, 48, who told Reuters he witnessed the incident while jogging along Tel Aviv's Mediterranean promenade.

"He began to run toward the security guards. They saw him, took their guns out and told him to get down on the ground," Cohen said.

"He continued running and then they fired in the air and ordered him again to lie down. He continued to advance. They jumped on him and took his bag away."

Police said one of the guards was slightly wounded and the attacker was taken into custody.

"It appears he was mentally unbalanced," Tel Aviv police chief Yoram Ohayon told reporters.

Israel Radio said the assailant was a 41-year-old Israeli with a criminal record.

(Writing by Ori Lewis, Reporting by Maayan Lubell and Baz Ratner, Editing by Jeffrey Heller)

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Analysis: Hollande's softly-softly plan needs tough execution

PARIS (Reuters) - After six months keeping the world guessing about whether he had a vision for fixing France's sickly economy, President Francois Hollande has unveiled a battle plan "à la française" to ease companies' labor costs and trim public spending.

But the softly-softly pace of adjustment may be too slow to satisfy financial markets after Moody's on Monday became the second credit ratings agency to strip Paris of its AAA rating, citing both a loss of competitiveness and low growth.

Hollande's "competitiveness pact" aims to create 300,000 jobs and lift output by half a percent over five years by granting 20 billion euros a year in corporate tax relief and pruning public spending by 1 percent.

The measures will be funded by modest sales tax rises from 2014, sparing households immediate pain. Tweaks to labor laws will follow next year to make hiring and firing somewhat more flexible while extending the length of job contracts.

The plan is bold for a left-wing French government, yet it falls short of what business leaders wanted and critics say it may be too timid to pull the economy out of decline in time.

Moreover, a key plank - spending cuts of 12 billion euros a year - will require sharp reductions in welfare payments or local government, hard to sell to a parliament full of mayors and civil servants, and an electorate including more than 5 million public sector workers.

"We've taken a big step forward but we've lost time. We should have started two months ago," said a government source. Some in Hollande's team had nudged the president to move sooner but found that "he does not like to be rushed".

"Hollande has not said where the 12 billion euros will come from because he doesn't know. None of us knows. There would be a lot of resistance to public sector cuts," the source said.

Most economists have applauded Hollande's move to embrace reform, despite muttering from Berlin that the measures should be bolder.

But they say success, in the face of stalled growth and rising 10 percent unemployment, depends on Hollande being able to implement all his plans - corporate tax relief, labor reform and spending cuts - to the letter.

That will hinge on acquiescence from a disgruntled public, on the euro zone avoiding further crisis or a deeper lurch into recession, and on investors keeping French borrowing costs low.

"If he can meet all these commitments it would be remarkable and he could really make a difference. If he only partially meets them the results are harder to predict," said Elie Cohen, an economist who advised Hollande during his election campaign.

Cohen sees a risk of France being sucked into the sort of downward spiral that has afflicted Greece, Portugal, Spain and to an extent Italy.

"A euro zone recession could be decisive," he added. "If France misses its growth targets and then its deficit targets, he'll need to do a third austerity plan on top of these measures and that would look seriously like a Mediterranean scenario."

TIME BOMB?

Hollande is under growing pressure from foreign investors concerned at France's strained public finances, flatlining economy and industrial decline that has led to a 70 billion euro trade deficit.

Paris also faces new competition for its exports from Spain and Italy, which have been forced by their debt crises to reform their labor and product markets faster.

Hollande's November 6 announcement of the tax rebates was his response to an independent review of competitiveness that recommended 30 billion euros in direct cuts to labor costs.

The rebates will be linked to payroll size in a way that the government says is equivalent to a 6 percent reduction in labor costs from 2013.

Hollande's economic advisers, who include a U.S.-educated academic and a former investment banker, expect the rebates to have a similar effect to an internal devaluation, raising profit margins, especially for labor-intensive manufacturers and small firms, for a couple of years until prices adjust.

The government reckons this could boost exports by 10-15 billion euros over two years, shaving the non-energy trade deficit.

"All other things being equal, this will improve the current account by quite a bit," said a government adviser, whose position bars him from being quoted by name.

JOB TRICKLE

Naysayers note that any trickle of jobs created through the tax rebates will be outstripped by continuing job losses as long as economic growth remains below 1 percent.

A rule of thumb for France is that employment stabilizes once growth reaches 1.5 percent, and it takes 2 percent expansion or more to achieve a net increase in jobs.

"The tax rebate plan may enable us to absorb some of the recession, by adding some jobs, but it won't boost economic activity," said Philippe Ansel, an economist with Fondation Concorde, a business-funded, economically liberal think-tank.

"France remains squashed between Germany, with its high-quality products, and Spain and Italy, which have made bigger efforts to reduce their labor costs."

Like other critics, Ansel says the rebates are worth only a net 10 billion euros to companies since they come on top of 10 billion euros a year in corporate tax rises in the 2013 budget.

His think-tank advocates a 50 percent cut in payroll contributions for companies exposed to foreign competition.

Hollande is also under fire for capital gains tax changes that will penalize investors in start-ups as well as failing to make good on a promise to ease the tax burden on corporate profits that are reinvested.

"You'll see the impact of these measures in 2014 and 2015. There will be less wheat to harvest," said Ansel.

NOT CRAZY, BUT DELIBERATE

French public spending accounts for 56 percent of economic output, second only to Denmark at 58 percent, and the tax take from companies amounts to 17.9 percent of gross domestic product, compared to just 4.3 percent in Denmark.

Departing from Socialist dogma, Hollande questioned at his first presidential news conference this month whether the high spending bill had brought the French a better quality of life.

Hollande sent his prime minister to Germany to tell Chancellor Angela Merkel that France would reform at its own pace and would not be pressured to go faster.

His advisers dismiss accusations of foot-dragging from Berlin and by The Economist magazine.

"Cutting 60 billion euros (from public spending) in five years is anything but timid. The idea it's not ambitious is insane," said Thomas Philippon, a finance ministry adviser.

"Doing crazy things isn't going to work. You have to do things gradually but deliberately and in a sustainable way."

Yet Hollande's economic team knows the pressure is on.

Labour Minister Michel Sapin told Reuters that beyond the labor flexibility accord the government is seeking, it could look at making people pay into the pension system for longer, another topic previously taboo for the French left.

"It's fine to tell the Germans we'll reform at our own pace - but we do have to reform," said the first government source. "Hollande is a very prudent person, and that's fine, but if you spend too much time talking, you risk getting nowhere."

(Reporting By Catherine Bremer; Editing by Paul Taylor)

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Frail Turkish ex-president appears in landmark coup trial

ANKARA (Reuters) - A retired Turkish general who seized power in 1980, sending thousands to jail and to the gallows, faced a court on Tuesday by video link from hospital, looking ill and gaunt, in a trial marking a watershed in Turkey's emergence from army domination.

Kenan Evren, who governed as President into the late 1980s, says the coup was necessary to save a country beset by street fighting. Virtually the entire political class was rounded up and interned, thousands were tortured and many more disappeared.

The 95-year old, dressed in a black jumper, a sheet pulled up over his legs, cut a brittle figure, a shadow of the strongman who led Turkey for nine years.

His cheeks sunken, he appeared tired and expressionless, giving little indication of whether he understood what was being said in the courtroom as the indictment against him was read.

A nurse helped him lie up in bed and he leant over occasionally to consult a lawyer sat in his room at an Ankara military hospital. He spoke to confirm his father's and mother's names, date and place of birth as the court went through the formality of confirming his identity.

He gave his monthly income as 13,330 Turkish lira ($7,400).

Turkey remains haunted by the coup, its third in 20 years. Evren's appearance on television screens in court epitomized how far the country has come in taming a once all-powerful military.

Victims' lawyers have said Evren should be treated no differently to former Egyptian leader Hosni Mubarak and Chilean dictator General Augusto Pinochet. Both were forced to appear in court, one on a bed behind bars, the other in a wheelchair.

The once-dominant secularist generals have seen their power and prestige eroded sharply over the last decade in the course of a series of coup trials and political reforms under the rule of Prime Minister Tayyip Erdogan's Islamist-rooted AK Party.

A Turkish court in September sentenced more than 300 military officers to jail for plotting to overthrow Erdogan's government almost a decade ago in a trial that underscored civilian dominance over the armed forces.

Evren has said he does not regret the coup, arguing it restored order after years of chaos in which 5,000 people were killed in street violence between leftist and right-wing groups.

He was not expected to give testimony until Wednesday at the earliest, which will be the second of three days of hearings.

"GOVERNMENT SHOW"

Many Turkish secularists broadly supported the reining in of the army, but argue that coup conspiracy trials have been used as a pretext to round up scores of the government's political opponents and create a climate of fear.

Judges previously accepted requests by political parties, parliament and trade unions to be co-plaintiffs in the case, but there was skepticism from some about whether the Evren trial would bring justice to the victims of the coup.

Former minister Yasar Okuyan, who was among thousands jailed after the coup, was also dismissive of the trial, which attracted little public interest at the court house in Ankara.

"This is just a theatre ... This is a 30-year-old problem, a legal solution will not emerge. It's a government show," Okuyan told Reuters outside the courtroom.

In April, the court rejected an appeal by prosecutors to arrest Evren, disappointing victims who had hoped his detention would guarantee he appeared in court in person. His ill health precluded such an appearance.

Also appearing on the split screen television was the other defendant, retired air force commander Tahsin Sahinkaya, who was being treated at an Istanbul military hospital.

The generals long saw it as their right to intervene in political affairs and if necessary topple the government to safeguard the secular order set up by soldier-statesman Mustafa Kemal Ataturk after 1923.

Apart from the need to end the killings, the coup leaders were also worried by what they saw as a rising Islamist threat to the secular republic following the 1979 Islamic revolution in neighboring Iran. ($1 = 1.7978 Turkish liras)

(Writing by Daren Butler; Editing by Nick Tattersall and Ralph Boulton)

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Argentina's Fernandez faces her first general strike

BUENOS AIRES (Reuters) - Public transportation in Argentina as well as grain shipments from the agricultural powerhouse halted on Tuesday for a 24-hour strike over taxes called by a union boss once allied with the government.

The work stoppage by bus drivers, train conductors and port, airline and bank workers follows wide protests held on November 8 over high crime, soaring inflation and the policy response of President Cristina Fernandez.

The Peronist leader has seen her popularity tumble since easily winning re-election in October last year, as inflation runs at about 25 percent despite a slowing economy, according to private economists. The government publishes much lower inflation data, long dismissed by the markets as inaccurate.

"The strike is a consequence of slow economic growth and high inflation, which the government does not recognize and therefore does not reflect through adjustments in the sliding income tax scale," said Ignacio Labaqui, who analyzes Argentina for emerging markets consultancy Medley Global Advisors.

The International Monetary Fund has given Argentina roughly until the end of the year to improve its murky inflation reporting or risk sanctions.

Farmers also joined the protest led by Hugo Moyano, a gruff former truck driver once closely linked to Fernandez but now a leading opposition figure. As head of the country's CGT labor federation, Moyano wants lower taxes for workers to help compensate for inflation.

This is the first general strike that Fernandez has faced in nearly five years in office and the first to hit the country in a decade.

The work stoppage increases the stakes in the political battle between the president and Moyano. Ties between the two turned sour following the death of Fernandez's husband and predecessor as president, Nestor Kirchner, in late 2010.

Moyano's CGT federation split in two earlier this year, with his allies re-electing him as leader in a vote rejected by rival union bosses aligned with Fernandez. The fracture in the umbrella group risks deepening labor unrest as double-digit inflation stokes wage demands.

"This general strike raises the possibility that she is losing control of the street and it puts the unions that are allied with her in an uncomfortable position," Labaqui said.

Fernandez is moving to shore up her base. Her allies in Congress last month lowered Argentina's voting age to 16 from 18, a change that could help the politically ailing president court the youth vote ahead of 2013 mid-term elections.

Argentina is the world's top exporter of soy oil, needed to make biofuels, and soymeal used to feed cattle as far away as China, where the emerging middle class is clamoring for beef steak. The South American country also is the second biggest corn exporter after the United States.

"This (strike) was necessary, unfortunately," said Eduardo Buzzi, who heads the Argentine Agrarian Federation, which represents small-scale farms. "There is no way to dialogue ... This is the most anti-farm government Argentina has ever had."

The agricultural sector has long quarreled with Fernandez over the 35 percent export tax her government puts on soybean exports and curbs it places on corn and wheat shipments.

Calls went unanswered at the main grains port of Rosario and the usually noisy, truck-jammed entrance to the port of Buenos Aires was still, with activity expected to resume on Wednesday. The local stock and bonds market was also unusually quiet.

(Writing and additional reporting by Hugh Bronstein; Editing by Bill Trott)

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Assad troops fight to oust rebels from Damascus

AMMAN (Reuters) - Syrian government troops backed by tanks battled to oust rebel forces from an opposition stronghold in a Damascus suburb on Tuesday in the heaviest fighting in the capital for months.

In action in the country's north, rebel fighters stormed an air defense base that President Bashar al-Assad's military had used to bombard areas near the Turkish border.

On the international front, the Turkish foreign minister said NATO states had agreed to supply Turkey with a Patriot missile system to defend against Syrian cross-border shelling.

Although the deployment would be for defensive purposes only, it nonetheless marked a hardening in the foreign opposition to Assad.

The rebels also received a diplomatic lift with Britain officially recognizing the opposition Syrian National Coalition, set up this month to boost their chances of securing foreign aid and arms, as the legitimate representative of the Syrian people.

It was the ninth country to do so following France, Turkey and the Gulf Arab states.

After months of slow progress marked by poor organization and supply problems, the rebels have captured several army positions in outlying regions in the last week, including a Special Forces base near Aleppo, Syria's commercial hub.

They are also trying to take the 20-month-old revolt to the heart of Damascus, Assad's seat of power, and have dubbed this week "March to Damascus Week".

Elite Republican Guard troops backed by tanks attacked the rebel stronghold of Daraya on the city's southwestern edge and were met by fierce resistance from rebels, who hung on to their positions despite days of aerial bombardment, opposition sources said.

Twelve people were killed on Monday in Daraya, mostly by aerial bombing preparing for the ground offensive, activists said. Thousands of residents had fled to nearby suburbs.

A Western diplomat following the fighting said Assad had to show he could repel the rebel challenge to Damascus.

"He has to show that letting the bases fall in and round Damascus is only temporary while he begins to consolidate resources and personnel and deals with the struggles in the east," the diplomat said.

Also on Tuesday, two mortar rounds hit the Information Ministry building in Damascus, causing damage but no casualties, state television said. It blamed "terrorists" for the attack, the usual government term for anti-Assad forces.

On Monday, rebels seized the headquarters of an army battalion near the southern gate of Damascus, the nearest military base to the capital reported to have fallen to opposition fighters.

In the north, opposition sources said rebel fighters had captured sections an air defense base at Sheikh Suleiman, 18 km (11 miles) from the Turkish border and 30 km (20 miles) northwest of Aleppo.

"The fighters have taken three artillery pieces and have entered most of the base. Fighter jets are flying over the area to try and force them out," said Abu Mujahed al-Halabi, an activist with the opposition Sham News Network.

A rebel source said the fighters seized large stocks of explosives and would withdraw to avoid retaliatory air strikes.

"Assad's forces use the base to shell many villages and towns in the countryside. It is now neutralized," the source said.

MISSILES ON THE BORDER

In Ankara, Turkish Foreign Minister Ahmet Davutoglu said NATO states had agreed to supply Turkey with an advanced Patriot missile system to defend against Syrian attacks. Talks on its deployment are in the final stage, he said.

In recent months artillery and mortar fire from Syria has landed inside Turkey, increasing concern that the anti-Assad uprising could turn into a regional conflagration.

Turkey, Gulf Arab states and Western powers have all called for Assad - whose Alawite family have ruled Sunni Muslim-majority Syria in autocratic fashion for four decades - to relinquish power. Assad counts on the support of long-time ally Russia and Shi'ite Iran.

NATO Secretary General Anders Fogh Rasmussen said on Monday that any missile deployment would be a defensive measure and not to enforce a no-fly zone over Syria.

Although the rebels have taken large swathes of land, they are almost defenseless against the government's air force. They have called for an internationally enforced no-fly zone, a measure that helped Libyan rebels overthrow dictator Muammar Gaddafi last year.

Despite strong censure of Assad, Western powers have shied away from direct military involvement.

But the political campaign against Assad took a step forward on Tuesday when British Foreign Secretary William Hague announced that Britain had decided to recognize the new coalition of Syrian revolutionary and opposition forces as the people's sole legitimate representative.

(Reporting by Khaled Yacoub Oweis in Amman; Oliver Holmes, Erika Solomon and Dominic Evans in Beirut; Mohammed Abbas in London, Gulsen Solaker and Ece Toksabay; Writing by Angus MacSwan)

(This story was corrected to remove reference to Italy giving diplomatic recognition to the Syrian opposition. It has recognised the group as "legitimate representatives".)

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Poland arrests bomb plotter linked to Norway's Breivik

WARSAW (Reuters) - Polish authorities have arrested a radical nationalist who planned to blow up parliament and had links to the right-wing extremist who murdered dozens of people in Norway last year, they said on Tuesday.

The suspected plot - to detonate a bomb outside parliament when the country's most senior officials were inside - was the first of its kind since Poland threw off Communist rule more than 20 years ago.

It is likely to bring renewed scrutiny on radical right-wing groups inside Poland, which are fiercely opposed to the liberal government, and on the way extremists intent on violence share information with each other across Europe.

"This is a new and dramatic experience," said Prime Minister Donald Tusk, who, according to prosecutors, was one of the intended targets of the assassination plot, along with the president. "This should be a warning."

Prosecutors said the suspect, a 45-year-old scientist who works for a university in the southern city of Krakow, planned to plant four metric tons of explosives in a vehicle outside parliament and detonate it remotely.

The plot had parallels with Anders Behring Breivik, the Norwegian who set off a bomb in Oslo last year and then went on a gun rampage on a nearby island, killing a total of 77 people.

"The would-be bomber did not hide his fascination with Breivik. This should not be ignored," Tusk told a news conference.

The prime minister said that investigators had found practical connections to Breivik too: the Norwegian bought bomb components in Poland, he said, and an analysis of his contacts helped lead Polish intelligence to the suspect.

Authorities in Norway said they had been in touch with their Polish counterparts but gave no details.

Briefing reporters in the Polish capital, prosecutors said the suspect had assembled a small arsenal of explosive material, guns and remote-controlled detonators and was trying to recruit others to help him.

A video recording taken from the suspect, who has not been publicly identified, showed what prosecutors said was a test explosion he conducted, sending up a huge cloud of dust and leaving a large crater in the ground.

"He claims that he was acting on nationalistic, anti-Semitic and xenophobic motives," prosecutor Mariusz Krason said.

"He believed the situation in the country is going in the wrong direction, described the people ruling Poland as foreign and said they were not true Poles."

"He carried out reconnaissance in the neighborhood of the Sejm (parliament). This building was to be the target of the attack," Krason said.

EUROPEAN TIES

Poland is one of several European countries where far-right groups have become more visible in the past few years, a trend some scholars say is partly linked to hardship caused by the financial crisis.

In Hungary, opinion polls show strong support for the far-right Jobbik opposition party. Greece's ultra-nationalist Gold Dawn is backed by 10 percent of the population.

Most right-wing groups renounce violence, but some on the margins are more radical.

Roger Eatwell, a professor at Britain's Bath University who studies the far right, said though extremists intent on violence did not operate in networks, they do share information across Europe's borders.

"They look at each other through the Internet, they sometimes correspond with each other through the Internet, though they have to be careful because that is monitored," he said. "The bad news is that they are very hard to police."

In Poland, society is polarized between liberals, who back the government, and a substantial number of people who believe the country is neglecting its Catholic roots and succumbing to foreign influence.

A rally in the capital, Warsaw, this month by right-wing nationalists turned violent. Youths in the crowd, some of whom had been chanting anti-Semitic slogans, started throwing flares and stones at police.

Polish prosecutors on Tuesday produced evidence suggesting the suspect was planning a sophisticated attack on parliament.

They showed photographs of pistols and bags of ammunition which they said he had bought in Poland and Belgium. They also showed several vehicle license plates, both Polish and German, which they said had been found among his belongings.

They said the suspect had used his scientific background to assemble the explosives himself. "He is a specialist in the field," prosecutor Krason said.

Officials said that they had found explosive substances including hexogen and tetryl, as well as detonators that could be triggered remotely using a mobile telephone.

The dean of the Agricultural University in Krakow, where prosecutors said the suspect worked, said the man had never given any reason for suspicion.

"It never occurred to us that at our school there could be a person involved in such matters. There were no indications from his co-workers that anything unusual was happening," Roman Sady said.

(Additional reporting by Wojciech Zurawski in Krakow, Karolina Slowikowska and Chris Borowski in Warsaw, and Balazs Koranyi in Oslo; Writing by Christian Lowe; Editing by Robin Pomeroy)

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Colombia, FARC peace talks off to good start: rebel

HAVANA (Reuters) - Peace negotiations between Colombia and Marxist guerrillas are off to a good start in Cuba, a rebel negotiator said on Tuesday, after delays and rocky moments in the weeks before talks began to end Latin America's longest-running insurgency.

Tempered by a history of failure, Colombia's government and the Revolutionary Armed Forces of Colombia, known as FARC, started discussions on Monday with rebels calling a unilateral truce, boosting hopes for an end after nearly 50 years of fighting.

Rebel negotiator Jesus Santrich, wearing a gray jacket and dark neck scarf, told reporters outside a Havana convention center that the first session on Monday went smoothly.

"We're moving ahead at a good pace, on the right track and trying to make sure of the full participation of the public," he said in brief comments before entering the second day of talks.

Santrich, who is part of the FARC's political wing, spoke from a podium with microphones in a change of plans for the negotiators to stay mostly mum and out of sight of the media.

The government negotiators, led by former vice president Humberto de la Calle, made no comment upon their arrival.

Colombian President Juan Manuel Santos is betting a decade of U.S.-backed blows against the FARC has left the group sufficiently weakened to seriously seek an end to the war.

This is the third try at peace with the drug-funded rebels since they formed back in 1964. Past discussions ended in shambles, even strengthening the guerrillas' ability to attack civilian and military targets.

In a sign welcomed by war-weary Colombians and politicians alike, the guerrilla group called a two-month unilateral ceasefire on Monday, the first truce in more than a decade.

But the government reiterated its position that it would not halt military operations until a final peace deal is signed and expressed doubt the FARC was serious about its ceasefire pledge.

The negotiations have begun with the complex issue of rural development, with four equally thorny topics - ending the war, the political and legal future of the rebels, the drug trade and compensation for war victims - still to come.

The agenda is aimed at addressing some of the group's long-held concerns, but also finding redress for the tens of thousands of lives lost and millions of people displaced in the conflict.

De la Calle said on Sunday in Bogota that the first session was expected to last about 10 days before taking a break, with the date for the next round still to be decided.

Santos has said he wants an agreement within nine months, but the rebels say the process could take much longer because of the many complicated issues to be settled.

(Reporting by Jeff Franks; Editing by Bill Trott)

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Gaza truce agreed, Hamas says, to take effect in hours

GAZA/JERUSALEM (Reuters) - An Egyptian-brokered ceasefire in the Gaza conflict will go into effect later on Tuesday, a Hamas official said.

There was no immediate Israeli comment. Prime Minister Benjamin Netanyahu said earlier he was open to a long-term deal to halt Palestinian rocket attacks on his country.

"An agreement for calm has been reached. It will be declared at 9 o'clock (1900 GMT) and go into effect at midnight (2200 GMT)," Hamas official Ayman Taha told Reuters from Cairo, where efforts have been under way to end seven days of hostilities.

U.S. Secretary of State Hillary Clinton was heading to the region from Asia and was expected in Jerusalem late on Tuesday for talks with Netanyahu on Wednesday.

Earlier, Egypt's state media quoted Egyptian President Mohamed Mursi as announcing "that the farce of Israeli aggression against the Gaza Strip will end on Tuesday"

Mursi said, according to the reports, that "efforts to conclude a truce between the Palestinian and Israeli sides will produce positive results in the next few hours".

Amid international efforts mounted to stop the fighting and avert a possible Israeli ground invasion of the densely populated Gaza Strip, Israel pressed on with air strikes and Palestinian rockets flashed across the border on Tuesday.

"No country would tolerate rocket attacks against its cities and against its civilians. Israel cannot tolerate such attacks," Netanyahu said with U.N. Secretary-General Ban Ki-moon, who arrived in Jerusalem from talks in Cairo, at his side.

"If a long-term solution can be put in place through diplomatic means, then Israel would be a willing partner to such a solution," he said.

"But if stronger military action proves necessary to stop the constant barrage of rockets, Israel will not necessary to do what is necessary to defend our people," said Netanyahu, who is favored to win a January general election.

Hamas leader Khaled Meshaal said on Monday that Israel must halt its military action in the Gaza Strip and lift the blockade of the Palestinian territory in exchange for a truce.

Israel's military on Tuesday targeted about 100 sites in Gaza, including ammunition stores and the Gaza headquarters of the National Islamic Bank. Gaza's Hamas-run Health Ministry said six Palestinians were killed.

Israeli police said more than 150 rockets were fired from Gaza by late afternoon, many of them intercepted by Israel's Iron Dome system. Ten people were wounded in Israel, the military and an ambulance service said.

Medical officials in Gaza said 126 Palestinians have died in a week of fighting, the majority of them civilians, including 27 children.

Three Israelis died last week when a rocket from Gaza struck their house.

In an attack claimed in Gaza by Hamas's armed wing, a longer-range rocket targeted Jerusalem on Tuesday for the second time since Israel launched the air offensive with the declared aim of deterring Palestinian militants from launching rocket salvoes that have plagued its south for years.

The rocket, which fell harmlessly in the occupied West Bank, triggered warning sirens in the holy city about the time Ban arrived in Jerusalem for truce discussions.

In the Gaza Strip on Tuesday, Hamas executed six alleged collaborators, whom a security source quoted by the Hamas Aqsa radio "were caught red-handed" with "filming equipment to take footage of positions". The radio said they were shot. Militants chained one body to

A delegation of nine Arab ministers, led by the Egyptian foreign minister, visited Gaza in a further signal of heightened Arab solidarity with the Palestinians.

Fortified by the ascendancy of fellow Islamists in Egypt and elsewhere, and courted by Sunni Arab leaders in the Gulf keen to draw the Palestinian group away from old ties to Shi'ite Iran, Hamas has tested its room for maneuver, as well as longer-range rockets that have also reached the Tel Aviv metropolis.

Egypt, Gaza's other neighbor and the biggest Arab nation, has been a key player in efforts to end the most serious fighting between Israel and Palestinian militants since a three-week Israeli invasion of the enclave in the winter of 2008-9.

The ousting of U.S. ally Hosni Mubarak and the election of Mursi is part of a dramatic reshaping of the Middle East wrought by Arab uprisings and now affecting the Israeli-Palestinian conflict.

Mursi, whose Muslim Brotherhood was mentor to the founders of Hamas, on Monday took a call from Obama, who told him Hamas must stop rocket fire into Israel - effectively endorsing Israel's stated aim in launching the offensive last week. Obama also said he regretted civilian deaths - which have been predominantly among the Palestinians.

Mursi has warned Netanyahu of serious consequences from an invasion of the kind that killed more than 1,400 people in Gaza four years ago. But he has been careful not to alienate Israel, with whom Egypt's former military rulers signed a peace treaty in 1979, or Washington, a major aid donor to Egypt.

Addressing troops training in southern Israel, Defence Minister Ehud Barak said: "Hamas will not disappear but the memory of this experience will remain with it for a very long time and this is what will restore deterrence."

But he said: "Quiet has not yet been achieved and so we are continuing (the offensive) ... there are also diplomatic contacts -- ignore that, you are here so that if the order for action must be given - you will act."

Hamas said four-year-old twin boys had died with their father when their house in the town of Beit Lahiya was struck from the air during the night. The children's mother was critically wounded, and neighbors said the occupants were not involved with militant groups.

Israel had no immediate comment on that attack. It says it takes extreme care to avoid civilians and accuses Hamas and other militant groups of deliberately placing Gaza's 1.7 million people in harm's way by placing rocket launchers among them.

Nonetheless, fighting Israel, whose right to exist Hamas refuses to recognize, is popular with many Palestinians and has kept the movement competitive with the secular Fatah movement of Palestinian President Mahmoud Abbas, who remains in the West Bank after losing Gaza to Hamas in a civil war five years ago.

"Hamas and the others, they're our sons and our brothers, we're fingers on the same hand," said 55-year-old Faraj al-Sawafir, whose home was blasted by Israeli forces. "They fight for us and are martyred, they take losses and we sacrifice too."

Along Israel's sandy, fenced-off border with the Gaza Strip, tanks, artillery and infantry massed in field encampments awaiting any orders to go in. Some 45,000 reserve troops have been called up since the offensive was launched.

Israel's shekel rose on Tuesday for a second straight session while Tel Aviv shares gained for a third day in a row on what dealers attributed to investor expectations that a ceasefire deal was imminent.

(Additional reporting by Marwa Awad in Cairo, Writing by Jeffrey Heller; Editing by Giles Elgood)

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Congo rebels seize eastern city as U.N. forces look on

GOMA, Democratic Republic of Congo (Reuters) - Rebels widely believed to be backed by Rwanda seized Goma in eastern Democratic Republic of Congo on Tuesday, parading past U.N. peacekeepers who gave up the battle for the frontier city of one million people.

Fighters from the M23 group entered Goma after days of clashes with U.N.-backed Congolese soldiers that forced tens of thousands of residents to flee, raising fears of human rights abuses in the sprawling lakeside city.

A senior U.N. source told Reuters that international peacekeepers gave up defending Goma after the Congolese troops evacuated under pressure from the advancing rebels.

"There is no army left in the town, not a soul... Once they were in the town what could we do? It could have been very serious for the population," he said asking not to be named.

The M23 rebellion has aggravated tensions between Congo and its neighbor Rwanda, which Kinshasa's government says is orchestrating the insurgency as a means of grabbing the chaotic region's mineral wealth. Rwanda denies the assertion.

"We will continue (resisting) until Rwanda has been pushed out of our country ... There will be absolutely no negotiations with M23," Congolese Information Minister Lambert Mende said, adding that Kinshasa would talk directly only with Rwanda.

U.N. experts say Rwanda, a small but militarily capable neighbor that has intervened in Congo repeatedly over the past 18 years, is behind the revolt. Congo's mineral wealth, including diamonds, gold, copper and coltan - used in mobile phones - has inflamed the conflict and little has been spent on developing a country the size of Western Europe.

The capture of Goma will also be an embarrassment for President Joseph Kabila, who won re-election late last year in polls that provoked widespread riots and which international observers said were marred by fraud.

Congolese state television reported on Tuesday that Kabila, who has made few public comments on the rebellion in recent weeks, is travelling to Uganda, the mediator in the conflict with the eastern rebels.

Uganda's Junior Foreign Affairs Minister Asuman Kiyingi told Reuters the rebels would not attend the talks.

In the Congolese capital Kinshasa, security forces used tear gas and fired shots in the air to disperse a few hundred youths protesting about the fall of Goma. Residents in Congo's second city, Kisangani, attacked Kabila's local party headquarters.

While conflict has simmered almost constantly in Congo's east in recent years, this is the first time Goma has fallen to rebels since foreign troops officially pulled out under peace deals at the end of the most recent 1998-2003 war.

VICTORY PARADE

Hundreds of M23 fighters accompanied their leader Sultani Makenga into Goma, where they were greeted by cheering crowds shouting "welcome" and "thank you". Before they arrived intoxicated local people had thrown up roadblocks of stones in the largely deserted streets pelted by heavy rain.

"We've taken the town, it's under control," said Colonel Vianney Kazarama, a spokesman for the rebels. "We're very tired, we're going to greet our friends now." On Monday, Kazarama had denied the rebels would take the city.

Analysts said it was unclear if M23 would try to make Goma a stepping stone towards Kinshasa, as past rebellions have done, or would use the victory to push the government into talks.

"By making this demand (for talks), the M23 aimed to reduce the crisis to a domestic affair, thereby preventing Kinshasa from internationalizing it in order to negotiate a solution at the regional level...," conflict think tank International Crisis Group said in a note.

Goma's fall risked triggering "serious human rights abuses against civilian populations" and had the potential to "relaunch open warfare between the (Democratic Republic of Congo) and Rwanda".

Before M23 took the city, streams of residents headed for the nearby border with Rwanda. More than 50,000 people who fled earlier fighting abandoned refugee camps around Goma, according to Oxfam.

"With the war, we're suffering so much, I've never seen anything like this in my life," a woman who gave her name only as Aisha told Reuters, clutching her three children.

While M23 has been accused of abuses in areas it controls, it has also set up an administration that tries to provide basic services such as health care, police training and rubbish removal, residents have told Reuters.

M23 is led by mutinying soldiers who rose up eight months ago, contending that Congo's government violated a 2009 peace deal that was meant to integrate them into the army. Many, however, believe they have since become a front for Rwanda.

Congo analyst Jason Stearns said Rwanda would draw international criticism for the fall of Goma, the capital of Congo's North Kivu province, but also regain influence. Donor nations, some of which had frozen aid to Kigali over its alleged backing for the rebellion, would be forced to accept its role in any negotiated settlement with Kinshasa.

"Donors, and probably the Congolese government, will have no choice but to deal with the rebels and call on Rwanda to help," he said.

Rwanda accused Congolese troops on Monday of shelling the Rwandan border town of Gisenyi, injuring three people, but it added it would not respond militarily to what it called Congo's "provocation".

Rwandan Foreign Minister Louise Mushikiwabo said Goma's fall showed there was no military solution and called for talks.

KIGALI'S ROLE

The U.N. has about 6,700 peacekeeping troops in North Kivu, including some 1,400 troops in and around Goma, and the mission had previously promised to defend the town, using attack helicopters to strike rebel advances.

On Tuesday afternoon armored U.N. vehicles still circulated in the streets of Goma, offering help to residents, but troops did not try to block the rebels. No government soldiers were to be seen, with residents saying they left along the main road west toward Bukavu after the rebels began infiltrating.

Wars in the central African nation have killed about 5 million people and many eastern areas are still afflicted by violence from a number of rebel groups, despite the decade-long peacekeeping mission.

Uganda has blamed the escalation of fighting on a leaked U.N. report that accused it and Rwanda of supporting Congolese rebels, a document Kampala said damaged its mediation efforts.

Kampala has vigorously denied the U.N. charges, which emerged in October, and Kiyingi said they had undermined Kampala's mediating role.

"Uganda was mediating in this conflict ... and we had managed to restrain M23," he said. "Then the U.N. comes up with these wild and baseless allegations against us and we decided to step aside and leave the situation to them and now you see the results."

Uganda has threatened to pull its troops out of peacekeeping operations in Somalia unless the U.N. allegations are withdrawn.

(Additional reporting by Elias Biryabarema in Kampala; John Irish in Paris; Richard Lough in Nairobi; Bienvenu Bakumanya in Kinshasa; Richard Valdmanis, David Lewis, and Bate Felix in Dakar; Writing by Richard Valdmanis; Editing by David Lewis and David Stamp)

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