Madrid aims to dismantle ETA's financing network

Batasuna, whose name means "unification," confirmed that eight of its members had been arrested, including treasurer Jon Gorroxategui and former national bureau member Rufi Etxeberria, the French news agency AFP reported.

All the suspects are alleged to have raised money for ETA through a group of companies that earned some 12 million euros (US$10.8m) in profits each year, the interior ministry said.

'Heavy blow'

ETA is classified as a terrorist group by Spain, the European Union and the United States.

But Batasuna, its political wing, won around 10% of the vote in the last Basque regional elections.

ETA has resumed its armed struggle against Madrid

"It is a heavy blow to the financial structure of organisations that fund ETA," Spanish Interior Minister Mariano Rajoy told a news conference.

His government department said in a statement that the arrests were part of a police operation started in 1998 with the aim of dismantling ETA's financial network.

Ten days ago the Spanish Government proposed legislation to outlaw political parties found to support terrorism.

The BBC Madrid correspondent says this move was widely seen as aimed at Batasuna, which recently changed its name to the National Socialists of Alava, Vizcaya and Guipuzcoa.

Firearms seizure

In a separate development, sources close to an investigation in the south-western French town of Castres said police seized large quantities of explosives and firearms, the AFP reported.

Hand grenades, rockets, assault rifles, semi-automatic weapons, pump-action shotguns and large quantities of ammunition were found during a raid on a house thought to belong to ETA, the sources said.