Israeli forces laid siege yesterday to the spot where Jesus was born, seeking to arrest dozens of Palestinian gunmen they said had fired on them from the Church of the Nativity.

Five more people were reported dead in the West Bank town of Bethlehem, bringing the death toll to 10 since the Israelis rumbled in early Tuesday with tanks and armoured vehicles and proclaimed the biblical city a "closed military zone".

With the Israelis deployed on Manger Square opposite the church and restricting movements within the city, hospital officials and relief workers feared other bodies could be laying unclaimed on the streets.

Witnesses said between 300 and 400 people were holed up without food in the Nativity Church, one of Christianity's holiest sites. They said most were civilians, including women and children, and half a dozen were wounded.

But Israeli officials said the crowd included dozens of gunmen affili-ated with Palestinian leader Yasser Arafat's Fatah movement.

An Israeli military source, who asked not to be named, said the Palestinians had opened fire on Israeli troops, and "we have tried to establish contact with them so that they can be arrested without spilling blood".

Israeli army officials said they had given strict orders not to fire at any churches. But Palestinian sources said a 39-year-old Palestinian was killed by an Israeli sniper outside the Church of the Nativity.

Michel Sabbah, the Latin patriarch of Jerusalem, said the Palestinians could claim sanctuary inside the church and had already laid down their arms.

A group of 200 clergymen representing all the churches in the Holy Land tried to enter the city yesterday but were turned back at a roadblock.

The Israeli army occupied the town hall across from the Nativity Church yesterday after blowing away the door, correspondents said.

They said about 20 Palestinians, including six journalists, were arrested as the Israelis took the building also housing a local television station and communications centre. Israeli radio reported 25 arrests.

In Washington, Powell repeated calls for Palestinian leader Yasser

Arafat to do more to end suicide bombings and other attacks -- which have surged in recent days -- but said Washington did not support Israeli Prime Minister Ariel Sharon's suggestion Arafat be exiled.

"Sending him into exile will just give him another place from which to conduct the same kinds of activities and give the same messages that he's giving now," Powell said on ABC's "Good Morning America" programme.

He said the deaths of scores of Israeli civilians in suicide bombings over the past six days would not advance the Palestinian cause.

Meanwhile, the UN Security Council was preparing to meet in New York to discuss the spiralling violence after Israel said for the first time since the 1993 Oslo peace accords that it could send Palestinian leader Yasser Arafat into exile.

But UN Middle East peace envoy Terje Roed-Larsen said: "I think it is impossible to initiate a political or diplomatic process in the coming days."

The Israeli army released a document Tuesday, translated into English, which it said had been seized from Arafat's compound and showed a direct link between the Authority and the Al-Aqsa Martyrs Brigades.

It appeared to show the Brigades asking for money from Arafat's financial adviser. It said suicide

attacks cost about 145 dollars each, and asked for funds for up to nine attacks weekly.

EU foreign ministers prepared to gather for an emergency meeting later yesterday in Luxembourg, while Arab ministers are to gather in Cairo on Thursday.

But Israel quickly dismissed a call from the European Commission for an international meeting on the violence that would include representatives from the Palestinians and moderate Arab nations.

In other violence in the city yesterday, a man was killed in a shootout, a 60-year-old policeman died of wounds suffered Tuesday and militant bled to death after being shot and left in the street, Palestinian sources said.

Occasional fire from southern Lebanon, from where Israel withdrew in May 2000 after 22 years of occupation, has prompted fears the military clashes could expand to a "second front."

Israel says Iran has placed thousands of rockets in south Lebanon, where Hezbollah guerrillas attacked Israeli positions on Tuesday. Israel hit back with air raids.

Thousands of protesters who tried to march on the US embassy in Lebanon were pushed back by Lebanese police using tear gas, batons and water cannon. Dozens were injured.