Israel is “waging an open-ended all-out war against the Palestinian people that aims to topple the Palestinian presidency and the Palestinian government”, Palestinian chief negotiator Saeb Erekat said on Thursday, according to Reuters.

Erekat's comments came after the Israeli army arrested eight Hamas ministers, one-third of the 24-member Hamas-led Cabinet, as well as 20 Palestinian lawmakers, including Deputy Prime Minister Nasser Shaer and Labor Minister Mohammed Barghouti.

Palestinian security officials said that Israeli occupation forces attacked a building in Ramallah where the ministers had gathered for the night, as well as sites in the southern West Bank city of Hebron.

Palestinian President Mahmoud Abbas asked the United Nations to intervene to secure the immediate release of the Hamas officials, Alvaro de Soto, the UN special envoy for the Middle East peace process, told Reuters.

Israeli forces, backed by armored vehicles and helicopter gunships, crossed into southern Gaza early Wednesday in what the army said was an operation aimed at releasing a soldier kidnapped by Palestinian resistance fighters.

Hamas lawmaker Mushir al-Masri said that the Israeli incursion in Gaza and the latest arrests of Hamas ministers and Palestinian MPs were part of a “pre-planned plot to destroy the Authority, the government and the parliament and to bring the Palestinian people to their knees.”

Israel Radio said Shin Bet security chief Yuval Diskin had warned President Mahmoud Abbas on Sunday, the day of the kidnapping, that "If the soldier is not returned in 24 hours, Israel will not allow the Palestinian government to survive."

* Kidnapped Israeli executed

18-year-old Eliahu Asheri, an Israeli settler who was kidnapped earlier this week was found dead overnight in the West Bank city of Ramallah, as the Israeli occupation forces pressed their incursion into Gaza.

Palestinian security sources confirmed that the Israeli settler, who was reported missing Sunday from the West Bank, was recovered overnight by Israeli troops.

On Wednesday, the armed Popular Resistance Committees had displayed a photocopy of the identity papers of Asheri and threatened to execute him unless the Jewish state ends its recent offensive in the Gaza Strip, which forced thousands of Palestinians to abandon the city seeking a safe shelter.

Meanwhile, Foreign ministers of the G8 countries meeting in Moscow called for the immediate release of the Israeli soldier and demanded Israel to exercise utmost restraint.

"The detention of elected members of the Palestinian government and legislature raises particular concerns," the ministers said in a written declaration.

But Israeli Defense Minister Amir Peretz vowed that Israel would intensify its military operations in Gaza. “The army is ready for a severe and extensive operation in Gaza," he said.

* Occupation forces enter Gaza

Reports say Israeli soldiers launched the incursion from the Karem Shalom border crossing in southern Gaza and took up positions shortly before 3 a.m. (8 p.m. ET) Wednesday on farmland outside the disused international airport about one kilometer inside the Gaza border.

It is unclear how many soldiers are participating in the operation, which the military said was aimed at freeing Cpl Gilad Shalit, who was captured Sunday in a raid claimed by three different Palestinian resistance groups – including the armed wing of the ruling party Hamas.

The Israeli army said the operation would remain “limited and surgical”.

"The IDF will continue to make every effort to return Cpl. Shalit home quickly and safely," the military said Wednesday in a statement.

"The Palestinian Authority, led by the democratically elected Hamas government, is fully responsible for any attacks emanating from the Gaza Strip, and Israel holds it responsible for the safe and quick return of Cpl. Shalit,” it added.

* Ground incursion

Air strikes on three bridges and a major power plant in the Gaza Strip preceded the ground incursion.

Witnesses said Israeli warplanes also bombed a Hamas training camp in southern Gaza and knocked out electricity and water supplies for most of the 1.3 million residents of the Gaza Strip.

Palestinian families living in the path of the Israeli incursion are fleeing their homes to seek refuge in the nearby town of Rafah, near the Gaza-Israel-Egypt border.

The Israeli army reported no resistance, but reports say Palestinian resistance fighters are building barricades and preparing hideouts and ambush positions.

Israeli army officials also told The Associated Press on condition anonymity that warplanes flew low over the home of Syrian President Bashar Assad, claiming that he is sheltering Hamas leaders blamed by Israel for the soldier's abduction.

Israeli Prime Minister Ehud Olmert claimed that the first major incursion since the Gaza withdrawal last year wasn’t aimed at recapturing the strip. “We have a central goal and that is to bring Gilad home,” he said.

Olmert has refused demands by Shalit’s captors to free all Palestinian and children held in Israeli jails in exchange for the soldier’s release.

Hamas’ political leaders have denied any knowledge of Shalit's abduction, but have called for his release.

In another development, Palestinian fighters in the occupied West Bank said they kidnapped a Jewish settler and would kill him if Israeli continued its military operations in Gaza.

* “Military madness”

Hamas’ spokesman Ghazi Hamad said that the Israeli incursion was unjustified, describing as “military madness”.

He added that the crisis could be solved through "contacts with Arab and international parties".

Palestinian President Mahmoud Abbas also denounced the military operations in Gaza as "collective punishment", describing it as a "crime against humanity".

On Tuesday, Hamas and Fatah agreed on a statehood plan outlining a common political platform for negotiations with Israel, but the move appears to have been overtaken by events on the ground.

Under the agreement, Hamas agreed to accept a Palestinian state on the West Bank and in Gaza while maintaining its refusal to recognize Israel’s right to exist. It also authorized President Abbas to conduct negotiations with Israel.