Israeli troops launched airstrikes on the outskirts of Gaza City and exchanged gunfire with Palestinian militants Wednesday, killing five people, officials said.

Israeli forces have been searching for smuggling tunnels and explosives in Gaza City's Shijaiyeh neighborhood since the weekend and have killed a total of 15 Palestinians, including a 4-year-old boy, doctors said.

About 17,000 people have been without power and running water, residents said.

The operation is part of a major military offensive Israel launched in late June after Hamas-allied militants captured an Israeli soldier in a cross-border raid.

The five Palestinian victims Wednesday were killed in two airstrikes and exchanges of fire, Palestinian witnesses and hospital doctors said. At least one of those killed was a gunman, doctors said.

Troops also flattened crops, destroyed greenhouses and chicken coops and uprooted dozens of trees, residents said. The army had no comment on the report about the destruction. In recent years, troops have routinely destroyed farming areas and orchards in the Gaza Strip, citing the need to deprive gunmen and rocket squads of cover.

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The army said that during Wednesday's searches, troops discovered a large smuggling tunnel stretching some 150 yards from a house toward the Karni cargo crossing between Gaza and Israel.

The crossing has been closed for much of this year due to warnings of possible attacks. U.S. diplomats have proposed stationing international observers at Karni to improve security and expand its opening hours. Israeli and Palestinian officials have said they will consider the idea.

Yuval Diskin, the head of Israel's Shin Bet domestic security agency, said Palestinian militants are smuggling large quantities of weapons through tunnels under the Gaza-Egypt border, according to Israeli media Wednesday. On Tuesday, he told a parliament committee the militants were digging 20 tunnels under the border.

"Except for tanks and planes, they are smuggling everything," he said.

The smuggling skyrocketed after Israel withdrew its troops from Gaza a year ago, Diskin said. The border is now controlled by the Palestinians and Egypt, with the help of European monitors.

Also Wednesday, some 200 children of Palestinian civil servants protested outside the office of Palestinian Prime Minister Ismail Haniyeh in Gaza City. The children said they would go hungry soon if their parents weren't paid.

The Hamas-led government is broke, mainly due to an international freeze on aid payments to the Palestinian Authority. Despite the cash crisis, Hamas has rejected international demands that it recognize Israel and renounce violence.

As a result, Hamas has largely been unable to pay 165,000 civil servants, including some 40,000 teachers and 85,000 members of the security forces.

"We are suffering, we are starving and the government should be responsible for this," said Abed Khamid Hamos, 14, one of the young protesters at Haniyeh's office.

The children held banners saying their families cannot afford to send them to school. The teachers' union has said it would launch an open-ended strike at the start of the new school year next week.

Some 300 unemployed Palestinian laborers surrounded the parliament building Tuesday, demanding welfare payments, scuffling with police and waving empty plates in another challenge to the beleaguered Hamas-led government.

CountryWatch: Israel