Gunmen armed with mortars and grenades fought in several areas of Gaza City on Saturday, killing two men on the third straight day of Hamas-Fatah factional clashes.

The deaths brought to 20 the number of Palestinians killed since late Thursday, and a least 66 people were wounded, medical officials said. The rival Hamas and Fatah movements traded angry accusations, and each held several supporters of the other side hostage.

The violence froze talks about bringing Fatah into the Hamas-led government, negotiators said. Fatah's leader, moderate Palestinian President Mahmoud Abbas, said he would go ahead with his plan to call early elections if the coalition negotiations don't produce results within two to three weeks.

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The Gaza fighting, which started late Thursday, was among the deadliest in nearly two months. Gun battles raged across Gaza City on Friday and continued early Saturday. One man was killed late Thursday, followed by 16 deaths on Friday and two more Saturday. Also, a Hamas gunman died Saturday of wounds sustained the day before, medical officials said.

Palestinian Prime Minister Ismail Haniyeh of Hamas issued a statement calling for calm, but in a clear jab at Abbas, criticized "trouble makers who are trying to veer away from the path of our people" by receiving "dirty American funding and arms." The U.S. recently pledged more than $80 million to help bolster Abbas' forces.

Streets in the hardest-hit neighborhoods were deserted Saturday, and only bakeries and groceries opened for business. Gaza City's main outdoor market was closed. Al Azhar University called off exams scheduled for Saturday, and the Interior Ministry told its employees to go home.

A gun battle erupted Saturday near the Islamic University, killing one man, according to hospital officials. In a firefight elsewhere in the city, a Palestinian policeman was killed.

Before dawn Saturday, Hamas gunmen fired mortars at the Abbas-allied Preventive Security Service headquarters and at the home of the force's chief, Rashid Abu Shbak, officials said.

In fighting around the compound on Friday, six Hamas gunmen were killed and a seventh died Saturday of wounds sustained in that battle, said Hamas spokesman Ayman Taha. He accused Fatah loyalists of storming a mosque near the security headquarters and executing a senior Hamas activist inside while he was reading the Koran, the Muslim holy book.

On Saturday, blood stains were still visible on the mosque's carpet and the bathroom tiles.

Fatah denied it had stormed the mosque, but said Hamas gunmen had used the mosque as a base for attacking the security headquarters.

At another Gaza City mosque, Hamas activists were hanging posters with the photos of Hamas supporters killed or wounded in the fighting. "This is the act of the insurgents. These are the criminal activities of the pro-Zionist, American criminals," the caption read, in reference to Fatah.

Mediators from two small factions, meanwhile, tried to win the release of hostages taken by the two sides; Fatah was holding 23 Hamas supporters, while Hamas held about 16 Fatah loyalists hostage, officials from the two groups said. Kidnappings have become a common tactic during the infighting. In all cases so far, hostages have been released unharmed.

Tensions have been high since Hamas swept parliamentary elections in January 2006, ending four decades of Fatah rule. Those tensions have frequently erupted into violence, killing some 50 people in Gaza since early December.

In its election campaign, Hamas promised to root out corruption and improve social services. But the Hamas-led government has been paralyzed by an international boycott and accomplished little on its agenda.

The government has also had trouble paying the salaries of 165,000 civil servants, including some 80,000 members of the security forces, most loyal to Abbas.

A senior Abbas aide said Saturday that the president will start paying long overdue salaries of the Palestinian security forces. Most of the security forces are loyal to Abbas.

The aide, Rafiq Husseini, said Abbas will pay the salaries from a fund of $152 million, including $100 million in tax rebates recently transferred by Israel, $30 million from the United Arab Emirates and $22 million pledged by Qatar. Israel had frozen the tax rebates last year, after the Islamic militant Hamas took power.

Husseini did not say how much of the money would go for the salaries of the security forces. Some of the money would also be spent on debt payment and welfare services, he said.

Israel and Western donors have cut off hundreds of millions of dollars in funding to the Palestinian government, demanding Hamas renounce violence and recognize Israel's right to exist. Hamas has rejected the conditions, despite deepening poverty in the West Bank and Gaza caused by the sanctions.

The international community has rerouted some of the aid to the moderate Abbas. Husseini said the president's office disbursed $285 million in 2006, but that it was not enough to cover salaries or maintain vital services.

Seeking a way out of the crisis, Abbas has called on Hamas to join Fatah in a moderate coalition government. Abbas, who was elected separately, hopes a moderate platform will get the sanctions lifted and allow him to restart peace talks with Israel.

Abbas has threatened to order early elections, but Hamas has said it would boycott a new vote. Abbas' threat to call new elections, along with the deadlock in unity talks, has fueled the factional violence.

Both Fatah and Hamas officials said late Friday that unity talks would be suspended until the fighting ends. Both sides blamed each other for the breakdown.

A poll published Saturday showed Palestinians divided over Abbas' election plan. The a-Najah University poll said 52 percent support early elections if a coalition government isn't formed. The poll, conducted on Wednesday, surveyed 1,360 people and a margin of error of 3 percentage points.