Israel's prime minister said his military will continue to hunt down militants, defending such strikes against international criticism and the reservations of a group of dissident air force reservists.

In television interviews aired Thursday, Prime Minister Ariel Sharon (searchalso indicated that prisoners held in Europe could be part of a swap between Israel and Hezbollah (search).

On Thursday, four Palestinian gunmen and an Israeli soldier were killed in gunbattles during two raids, one in the West Bank city of Hebron and the other in the Boureij refugee camp in Gaza.

Israeli raids into Palestinian towns and refugee camps are almost a nightly occurrence, though no air strikes aimed at killing leaders of violent groups have been carried out since Sept. 6.

Sharon gave interviews to the three Israeli TV channels on Thursday evening in advance of the Jewish New Year, which begins Friday at sundown.

Sharon told Channel 2 TV that Israel will keep targeting militants. "We are hitting, and we will continue to hit, those who strike out at us," he said.

In the past, such raids have provoked Palestinian reprisals, stoking the fires of confrontation as the bloody conflict nears the end of its third year.

Israel on Thursday temporarily grounded reserve air force pilots who -- in an unprecedented protest -- condemned air strikes in the West Bank and Gaza Strip and refused to fly such sorties.

The declaration by 27 pilots, including nine on active duty, was widely criticized in Israel as subversive at a time of war. In their petition, the pilots said air strikes on crowded Palestinian areas are "illegal and immoral."

On another subject, Sharon said a prisoner swap with the Lebanese Hezbollah has not been completed, but he indicated that prisoners held in Europe might be involved.

"We have good bargaining chips, in which the Iranians are interested, and in which Hezbollah is very, very, very interested," he told Israel TV, adding in the interview to Channel 2, "They are in a European country, and this is part of the deal ... They carried out terror attacks."

He did not explain further, and Israeli officials would not add details.

Sharon said the deal is "moving toward a solution" but has not been completed. The emerging exchange has Israel freeing Lebanese prisoners -- including two guerrilla leaders kidnapped in 1986 and 1994 -- along with detainees from other Arab countries and about 200 Palestinians.

Hezbollah would return an Israeli businessman, Elhanan Tannenbaum, abducted in October 2000, along with the bodies of three soldiers captured the same month and later declared dead by the Israeli military.

An Israeli air force navigator, Ron Arad, captured in Lebanon in 1986, apparently was not part of the deal. There have been no signs of life from Arad for more than a decade.

Indicating that Arad would not be included, Sharon said he told Arad's wife, Tami, that "leaders must make decisions," adding, "My eyes were full of tears when I spoke to her."

But in an interview with Channel 10, Sharon indicated that the prisoners in Europe might be used to win freedom for Arad. "I can tell you for sure that we have other means to apply pressure," he said.

Sharon ruled out freeing Palestinian uprising leader Marwan Barghouti as part of the prisoner exchange. Barghouti is on trial for his alleged role in terror attacks that killed 26 Israelis.

As in the past, the military announced that a closure would be in effect through the two-day new year holiday, which ends Sunday evening. For security reasons, all Palestinians are to be banned from entering Israel, except for humanitarian cases, the military said.

In Ramallah, meanwhile, Palestinian premier-designate Ahmed Qureia continued consultations toward forming a new government. On Thursday he met with a wide variety of Palestinian parties and factions, seeking support.

Achieving a new truce to replace one that collapsed last month is Qureia's top priority, according to party officials who met him. Palestinian leader Yasser Arafat's Fatah party is to appoint most of Qureia's ministers.

After seeing Qureia, Hassan Hraishe of the Democratic Bloc, a loose grouping of nine independent lawmakers, said the bloc's top priority is domestic.

"The main issue is to return all the stolen money from the monopolies, as we know that we know that millions of dollars were stolen," he said, referring to sweetheart business deals given to Arafat cronies.

Hraishe charged that the money is "in secret accounts now, and the only one who can release them is Mohammed Rashid," Arafat's secretive financial adviser.

Despite repeated reports of skimming and other shady financial practices, Palestinian officials deny that official money has been diverted. The well-respected Palestinian Finance Minister, Salam Fayad, dismissed reports this week that hundreds of millions of dollars in Palestinian funds had been shifted to Arafat's accounts.