Outgoing Prime Minster Ehud Olmert on Tuesday threatened that Israel would lash out against Gaza militants in response to ongoing cross-border attacks.

"We will never flee from our homes. We won't defend, but will attack - and stop once and for all what threatens our daily lives," he vowed.

Olmert made the comments while speaking to schoolchildren during a tour of rocket-battered communities bordering the Gaza Strip.

The prime minister added that, "I say, with full responsibility, that we know what needs to be done but we also know when to act in order so that you won't be scared and won't need to run breathlessly to the shelters."

Olmert's comments came after Foreign Minister Tzipi Livni said Tuesday that Israel must take all steps necessary to weaken Hamas' rule in Gaza, using a combination of immediate military, diplomatic, and economic measures.

During a conference at Tel Aviv University, Livni also called for Israel to respond to all Qassam rocket attacks originating from the Gaza Strip in order to ensure that Israel not present an image of weakness.

"Israel must respond to all [rocket] fire. It won't stop the attacks, but the image also has a purpose, when the image is that Israel is weak, our deterrent ability is weakened," she said.

While Livni said she was "embarrassed to call the situation in the Gaza envelope a truce, as long as the rocket attacks haven't stopped," she emphasized that the responsibility for ensuring quiet in the Strip lies with Hamas.

"If they know that we won't stay silent while rockets fall on Ashkelon they will enforce the truce themselves," Livni said.

Sources: IDF told to show restraint on rockets

Military sources told Haaretz that despite the recent escalation in the volume of rocket fire from Gaza, the Israel Defense Forces have been ordered to maintain a policy of restraint.

As a result, the IDF is embarking on very few operations against the rocket-launching crews.

Since the Gaza border flared up again on November 4, following an IDF operation to destroy a tunnel near the border in which six Hamas operatives were killed, more than 200 rockets have been fired at Israel.

This includes 32 Grad Katyushas fired at Ashkelon over the course of a few days. The IDF views this as proof that Hamas and Islamic Jihad have large stockpiles of rockets, including sizable numbers of the longer-range Katyushas.

While Hamas was directly responsible for some of the earlier launches, over the last two weeks, it has largely left the firing to other factions.

Palestinian efforts to lay bombs near the border have also spiked in recent weeks.

However, the IDF's rules of engagement have remained unchanged. Soldiers are allowed to fire freely at rocket- and mortar-launching cells immediately before, during or after a launch, and with permission from a senior officer, they can also fire at Palestinians trying to lay bombs within half a kilometer of the border fence. Other than that, however, no offensive operations are permitted: For instance, the army cannot attack Hamas' offices or training facilities or assassinate members of its military wing.

The main method via which Israel has tried to pressure Hamas instead is by tightening the blockade of Gaza. But while Hamas is feeling the pressure, it could opt to respond not by lowering the violence, but by escalating it, in the hopes of achieving a new cease-fire on better terms.

Meanwhile, Defense Minister Ehud Barak said Tuesday Israel would allow the entry of aid to the Gaza Strip for the day, following 24 hours without a rocket being fired at the western Negev.

Approximately 40 trucks carrying food and medicine will be allowed to enter through the Kerem Shalom crossing, and additional trucks carrying diesel fuel and cooking oil will be allowed through the Nahal Oz crossing.

The fact that Hamas has asserted almost total control over the smuggling tunnels from Egypt means that it largely determines what kind of merchandise enters the Strip. Israeli defense officials estimate that some 150,000 liters of low-quality diesel fuel enters Gaza via the tunnels every day, which enables trucks and buses to operate on a limited basis.

This also allows Hamas to reserve the fuel that arrives from Israel, which is of much higher quality, for the use of its military wing and key Hamas-run government offices.

Currently, both Hamas and the Palestinian Authority are pressing Israel to allow the entry of tens of millions of shekels worth of paper currency into Gaza.

The Strip's economy is still largely shekel-based, and it is currently facing a serious currency shortage, as many existing bills are too worn out to use. Some of the money would be used to pay salaries to employees of government offices affiliated with the PA.

PA Prime Minister Salam Fayyad raised this issue in recent talks with Defense Minister Ehud Barak and the head of the Defense Ministry's diplomatic unit, Maj. Gen. (res.) Amos Gilad. However, Israel has not yet decided whether to accede to Fayyad's request.