Palestinians yesterday marked the 62nd anniversary of the Naqba, the "catastrophe" of Israel's creation, demanding the right of return of hundreds of thousands driven from their homes.

Protests were staged in the Hamas-ruled Gaza Strip and in Lebanon, home to around 400,000 Palestinian refugees, as chief Palestinian negotiator Saeb Erakat blasted Israel for its "disregard of international law".

Some 3,000 people demonstrated in Gaza's Jabaliya refugee camp in a protest organised by the Islamist Hamas movement, and as many joined a demonstration in the Nuseirat camp staged by the Islamic Jihad.

"We will never give up the right of return" of refugees to their towns and villages, a Hamas leader, Muin Mderes, told the crowd in Jabaliya. He also called for the "resistance to unite" against Israel.

Israeli governments have refused to allow Palestinian refugees to return to homes they fled in 1948 over fears a massive return would threaten the state of Israel and its 5.7 million Jewish population.

Top Islamic Jihad leader Mohammed al-Hindi urged "all Palestinians, Arabs and Muslims to back the jihad and the resistance and be ready for the next battle with the enemy".

Children were among the Gaza protesters and carried the keys to homes their relatives had lost after the creation of Israel. An estimated 700,000 Arabs fled or were expelled from their homes.

In a message to mark the anniversary, Mr Erakat insisted that the refugees, who together with their descendants now number 4.7 million, have the right to return.

"In other conflicts, refugee rights have been honoured and respected, including the right of return, restitution and compensation. In stark contrast, however, Israel refuses to even recognise the Palestinian right of return, thus continuing to deny the refugees' basic rights.

"No state is above the law," Mr Erakat said.

And he insisted that the creation of a Palestinian state with annexed east Jerusalem as its capital "is a must".

His remarks come only days after Israel marked the 43rd anniversary of the capture of east Jerusalem and a defiant speech on Wednesday by Prime Minister Benjamin Netanyahu vowing to pursue settlement construction there.

"You can't flourish in a divided city and a flourishing city can't be divided or frozen," Mr Netanyahu said. "We will continue to build and develop ourselves in Jerusalem."

The Palestinians have warned that continued construction in Jewish settlements in annexed Arab east Jerusalem will torpedo newly launched indirect peace talks which are being brokered by the United States.

Tensions between the two sides spilled over into a deadly shooting earlier yesterday in the occupied West Bank when an Israeli settler, whose car had been stoned, shot dead a 16-year-old Palestinian youth, Palestinian security sources and activists said.

Hours later the army said Palestinian gunmen opened fire on a car, lightly wounding two Israelis in the region of Ofra, a Jewish settlement near the West Bank city of Ramallah.

Palestinians planned more protests in Gaza today to mark the Naqba and were also due to march to the grave of the late Palestinian leader Yasser Arafat in Ramallah.

There were also clashes yesterday between Israeli police and some 200 demonstrators who gathered in the Sheikh Jarrah neighbourhood of east Jerusalem to protest against Jewish settlements, an AFP correspondent said.

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