RAFAH, July 18: Palestinian gunmen battled forces loyal to Yasser Arafat's new security chief in southern Gaza on Sunday in a fresh spate of internal violence that signalled a growing breakdown of law and order.

Hundreds of gunmen, many of them masked, exchanged heavy fire with forces loyal to Arafat's cousin Moussa Arafat, whom he appointed as Gaza's new security chief following a series of high-profile abductions in the strip over the weekend.

The stand off stepped up pressure on Arafat to wipe out alleged widespread corruption that sparked the crisis which was deepened by the resignation of his prime minister Ahmed Qorei.

Arafat has not seen such turmoil since his Palestinian Authority took control over most of the Gaza Strip in 1994 under interim peace accords with Israel. "Where are the reforms you promised, Arafat," shouted gunmen who in the nearby town of Khan Younis. They later set fire to a car belonging to a security officer loyal to Arafat.

In a show of force, thousands of gunmen marched across the Gaza Strip on Sunday night demanding that Arafat fire Moussa Arafat, a member of an old guard widely viewed as corrupt.

At a meeting on Sunday of the Palestinian National Security Council, Arafat told Qurie he "strongly rejects" his decision to quit, cabinet minister Saeb Erekat said. Calls for reform have multiplied amid a brewing factional power struggle in the Gaza Strip in anticipation of Israeli Prime Minister Ariel Sharon's planned withdrawal of troops and settlers from the occupied territory by the end of 2005.

Earlier in the nearby town of Khan Younis in the Gaza Strip, gunmen attacked and burned down a post manned by members of a security service already controlled by Moussa Arafat, sending officers fleeing into the night.

Al-Aqsa Martyrs Brigades, a militant group within Arafat's Fatah faction, said it destroyed the facility to protest Moussa Arafat's appointment. At a news conference after the attack, Moussa Arafat said he had no intention of stepping down.

In a new blow to the Palestinian president's prestige, the commander of the Palestinian coast guard, Juma Ghali, tendered his resignation. Security sources said Ghali was protesting against Moussa Arafat's appointment and instability in Gaza.

Submitting his resignation, Qorei complained about "unprecedented chaos" in Gaza triggered by the brief abduction on Friday of four French aid workers, the police chief and another official by gunmen demanding reforms.

"Things have changed in the last two days. There are no more sacred cows. People are simply fed up," Sufian Abu Zaideh, a Palestinian deputy minister, told Israeli Army Radio. -Agencies