AL QUDS, Feb 27: Israeli Prime Minister Ariel Sharon demanded on Sunday the Palestinians smash militant groups after a Tel Aviv suicide bombing, saying he would freeze peace efforts and take military action if they did not heed his call.

"There will not be any diplomatic progress, I repeat, no diplomatic progress, until the Palestinians take vigorous action to wipe out the terror groups and their infrastructure in the Palestinian Authority's territory," the prime minister said.

Addressing his cabinet in forceful tones, Sharon claimed that Palestinian Islamic Jihad faction in Syria ordered the attack that killed four Israelis on Friday, violence that shattered a de facto truce that had raised hopes for peace.

Deputy Defence Minister Zeev Boim, speaking on Israel Radio, held out the option of an Israeli strike on Syria but said growing international pressure on Damascus could be more effective in curbing what he called its support for terror.

Signalling Israel was likely to hold its fire with Syria, Vice Premier Shimon Peres said: "Syria is involved in many terrible things and the United States is at the moment leading the initiative against Syria.

"We should allow the Americans to do this," he said. In Cairo, visiting Syrian Foreign Minister Farouq al-Shara denied any Syrian responsibility for the bombing outside a Tel Aviv night club.

"The Israeli accusation is baseless and is not based on any evidence, or even fantasies, because Syria has extended its hand for peace and supported the Palestinian people in recovering its rights peacefully," he said.

At the cabinet meeting, Sharon said Palestinian President Mahmoud Abbas's "immediate test" was to act against Islamic Jihad, which claimed responsibility for the first deadly Palestinian attack in Israel since November. -Reuters