Two Lebanese soldiers were killed yesterday in fighting with Islamist gunmen in a Palestinian refugee camp in south Lebanon, suggesting that a two-week confrontation with another militant group in the north is spreading.

As troops rushed to Ein al-Hilweh and security was tightened at other Palestinian camps, battles continued to rage at the northern Nahr al-Bared camp, where the Army is involved in a showdown with the Fatah al-Islam faction.

The clashes in the south began on Sunday evening when an al-Qaeda-inspired group of about 50 militants attacked a Lebanese army checkpoint on the edge of the Ein al-Hilweh camp. More fighting broke out the next morning as soldiers and militants traded heavy machinegun and mortar fire.

A mortar shell exploded in the centre of the coastal town of Sidon, about one mile from the camp. Two militants from the Jund ash-Sham group died in the fighting and at least eleven fighters and civilians were wounded.

The two Lebanese soldiers were the first to die in clashes in the south.

Dozens of Palestinians and Lebanese living in the Taamir district, where the fighting broke out, fled and spent the night sheltering in a mosque next to the camp.

“It’s a big conspiracy against the Palestinian people. Fatah al-Islam and Jund ash-Sham have nothing to do with us,” yelled a distraught mother, who called herself “one of the poor people of the camp”.

Ein al-Hilweh houses 70,000 refugees packed into an area of less than a square mile. It is the largest of Lebanon’s 12 established Palestinian camps and is known for its lawlessness and feuding between rival Palestinian factions.

Sweating soldiers sat in the shade beside an open crate of mortar shells near their checkpoint at the entrance to the camp. Smoke billowed out across the street and the walls of adjacent buildings were pockmarked with holes from bullets and rocket-propelled grenades.

Muhammad, who lives on the same street as the Jund ash-Sham stronghold, said that he saw several militants in military uniforms with masks covering their faces shooting at the army checkpoint. Jund ash-Sham, one of several al-Qaeda imitations in Lebanon, emerged in June 2004, composed of Lebanese and Palestinian Islamic extremists.

The death of a Jund ash-Sham fighter in Nahr al-Bared on Sunday appears to have triggered the attack on the army checkpoint in Ein al-Hilweh.

Palestinian sources in Ein al-Hilweh said that the attack was a rogue operation and that other Islamist factions were attempting to restore calm. A small bomb exploded overnight at another refugee camp in south Lebanon and tensions were running high in the other camps.

As well as the 12 established camps, Lebanon also plays reluctant host to a number of small military bases manned by pro-Syrian Palestinian factions, most of them in the Bekaa Valley in east Lebanon. Lebanese officials have said that one of those groups, the Damascus-based Popular Front for the Liberation of Palestine-General Command (PFLP-GC), is helping to fight the Lebanese Army in Nahr al-Bared. But in a rare interview, Abu Amine, the veteran commander of a PFLP-GC base overlooking Naameh, on the Mediterranean coast nine miles (15km) south of Beirut, said that his group would never raise their weapons against the Lebanese Army. He said that the fighting in Nahr al-Bared was an “American-Zionist plot” to weaken Arab resistance against Israel.

“It’s a plot to wipe out all the Palestinian camps so that we melt into Lebanese towns and forget about returning to our homes in Palestine,” he said.

Can they cope?

— Lebanon has about 72,000 combined forces troops, down from 160,000 in July, when Israel invaded the south of the country

— Many are conscripts. 18-30-year-olds are obliged to serve six months over a two-year period

— The Army’s core of 11 mechanised infantry brigades is under strength and unable to operate at the expected level of capability

— The 1,000-strong air force has few operational aircraft. Its outdated Hawker Hunters and Bulldogs are all grounded

— The Navy consists of a handful of inshore and river patrol boats and about 1,000 personnel

— The UN also has troops stationed in the country

Sources: Global Balance 2007; CIA World Factbook; globalsecurity.org

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