Fighting broke out yesterday between Somalia’s Islamist militias and the country’s rump Government, which is supported by Ethiopian troops. The battles reinforced fears of a major conflict in the Horn of Africa, one of the world’s most unstable regions.

Rival forces pounded each other with heavy shells and rockets near the Government’s last stronghold of Baidoa, about 155 miles northwest of the capital Mogadishu. On Tuesday the Islamist groups, who now control most of the country, had issued an ultimatum to the Government to withdraw thousands of soldiers or face an assault.

An Islamist commander at the front, contacted via satellite phone by The Times, said that the forces of the Union of Islamic Courts (UIC) had repelled an attack and were advancing on Baidoa. “We have taken a number of Ethiopian prisoners and we are now only 15 kilometres away,” he said.

If true, Ethiopia — which backs a weak but internationally recognised transitional government — could be expected to retaliate with force and effectively end any lingering negotiated settlement.

Regional analysts, however, believe the fighting is more likely to be the latest in a round of increasingly serious skirmishes, which threaten to spiral out of control.

“The season has changed and the land is drying,” one analyst said. “It is a low-level war already, but could stay like that for quite a while. I think the signal will be if the Ethiopians bring in air support.”

The fighting, which sent hundreds of people fleeing their homes, coincided with the arrival of an EU envoy who hopes to negotiate a peace deal to avert a war many fear would draw in neighbouring states.

Louis Michel, the European Commissioner for Development and Humanitarian Aid, held talks with President Abdullahi Yusuf and Ali Mohamed Gedi, the Prime Minister. He later travelled to Mogadishu for talks with the leadership of the UIC, which took over last summer, ending years of anarchic rule by clan-based warlords.

Washington accuses the Islamists of links to al-Qaeda and rejects face-to-face talks — a policy many Europeans fear could backfire by alienating moderate elements within what is essentially a coalition of 11 factions of widely differing radicalism. War could spread across the region and suck in Eritrea and Sudan, the main rivals of US-backed Ethiopia.

The fighting, which began as Mr Michel arrived in Baidoa, was on two fronts — Idale village, about 30 miles south of Baidoa, and later in Buulo Jadid, only about 15 miles north of the seat of the so-called Transtional Federal Government (TFG), which emerged from two years of tortuous negotiations in neighbouring Kenya. Commanders from both sides said the fighting had also spread to Mode Mode, a key stronghold of the Islamists, and the army garrison in Deynunay, 15 miles east of Baidoa.

“The fighting is so fierce, but government forces are still controlling Deynunay,” said Issak Adan Mursaley, a resident.

Last night Mr Michel said the Government and the Islamist militias had agreed to resume peace talks and that arrangements were being made for meetings in Khartoum, the capital of Sudan. “For me this is very significant,” said Mr Michel as he left Mogadishu after a day of diplomacy.

However, Ismail Hurre, the Somali Foreign Minister, said the Islamist movement wanted “to take control of Somalia through the barrel of the gun”. Mr Hurre, speaking from neighbouring Kenya, said: “They are not committed to peace. They want war.”

Leaders of the Islamist movement said they were willing to attend without conditions. The movement had previously said it would not attend talks until Ethiopian troops backing the Government left the country.

Somalia has not had an effective government since 1991.

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