We will exact a price for every attack

Raanan Gissin Israeli spokesman

And in continuing violence, a seven-year-old Palestinian girl was killed in crossfire between Israeli soldiers and Palestinian gunmen in the West Bank city of Hebron.

The explosion at the Wall Street Cafe in Kiryat Motzkin, a Haifa suburb, killed the bomber. It happened just three days after a suicide bombing at a Jerusalem restaurant on Thursday that killed 15 people.

Security fears

A BBC correspondent in Jerusalem, Nick Childs, says that relief that this time no Israelis died will be tempered by new fears that despite heightened security such an attack can still take place.

The bomb appeared to be targetting young people

Islamic Jihad has warned that more bombs will follow.

Speaking after the latest bombing, Israeli spokesman Raanan Gissin, said: "There's no doubt part of this campaign [is] trying to break the citizens of Israel, trying to achieve something that they weren't able to achieve around the negotiating table - it's a futile effort I can tell you."

The Israeli Government responded to the bombing in Jerusalem with air strikes on Palestinian targets and by seizing the unofficial Palestinian headquarters in Jerusalem, Orient House.

Despite the latest violence, Mr Sharon is reported to have given his Foreign Minister, Shimon Peres, the go-ahead to hold more talks with the Palestinians on a ceasefire, albeit not full peace negotiations.

But an Israeli political source said there would not be negotiations about political solutions while the violence continued.

Youngsters 'targeted'

Witnesses said a man got out of a taxi, walked to the restaurant terrace and detonated the explosives he was carrying in a bag.

Accused: Israel believes Arafat could do more

Islamic Jihad named the suicide bomber as 28-year-old Muhammad Mahmoud Nasr.

Another BBC correspondent in Jerusalem, Paul Wood, says the attack, like Thursday's, appeared targeted at Jewish youngsters.

In an attempt to stop violence from escalating out of control, a US envoy was meeting both sides on Sunday.

Hamas arrests

Renewed diplomatic efforts came as the Islamic militant group Hamas - which said it carried out Thursday's attack - announced that Palestinian security forces had arrested four of its members.

One of Israel's key demands has been that the Palestinian leadership detain militants that Israel blames for attacks on its citizens.

Victims were taken to nearby hospitals

But Israeli spokesman Raanan Gissin said Sunday's bombing showed Yasser Arafat and the Palestinian Authority were not taking the proper action to arrest those responsible.

"Another day, another suicide bombing," Mr Gissin said in an interview with the BBC.

"We will exact a price for every attack," he warned, adding that Israeli was going to "change the rules of the game" and take additional measures.

Retaliation

On Friday, Israeli troops stormed the Palestinians' main political foothold in the city, Orient House, as part of retaliation for Thursday's suicide bombing in Jerusalem in which 15 Israelis were killed.

Muhammad Mahmoud Nasr was named as the bomber

United Nations Secretary-General Kofi Annan on Sunday demanded an end to what a UN statement describes as the Israeli occupation of the building and called for an immediate ceasefire.

But Israel has declared that Orient House will never be handed back.

Palestinians have called for a "day of rage" on Monday to protest at the Israelis' actions.