A Sharon spokesman on Friday said the Israeli prime minister would refuse to meet with Palestinian president-elect, Mahmud Abbas, until he acted against armed resistance groups behind Thursday night's attack at the Karni crossing.
"The prime minister decided to freeze all contacts including those related to security because the Palestinians continue to do nothing against terrorism," Sharon media adviser Assaf Sharif said.
"The grace period that we accorded Mahmud Abbas is over," he said, adding that any plans for a meeting between Sharon and Abbas were off the cards for the time being.
Another Sharon adviser, Raanan Gissin, said the Israeli army now had "its hands free to launch operations because Palestinian leaders, although they have 30,000 armed men in the Gaza Strip, have not lifted a finger to stop the terrorists from acting and killing Israelis."
The Palestinians, however, flayed the Israeli decision to freeze all contact as unfair and detrimental to hopes of reviving peace talks.
The Israelis want action against
those behind the al-Mintar attack
"We reject the freezing of contacts announced by Israel as well as the criticism addressed at Mahmud Abbas because he does not officially take office until Saturday," Palestinian Negotiations Minister Saib Uraiqat said.
"The best way to relaunch the peace process is not to freeze contacts but to resume them."
The attack at the al-Mintar (Karni) crossing was led by three Palestinian fighters who moved in to the Israeli side of the border through a hole in a concrete wall punctured by about 100kg of explosives.
Israel sealed off Gaza and closed all border crossings after the attack, which was jointly claimed by Hamas, the Popular Resistance Committees and al-Aqsa Martyrs Brigades.
"We will continue to chase you and disrupt your sleep until you leave the land you occupied," the resistance groups said in a statement.
"The attack affirms the consensus of the resistance factions on the choice of jihad."
Palestinians marched to celebrate
the al-Mintar attack
Meanwhile, in fresh violence, Israeli troops killed a Palestinian in southern Gaza.
Several thousand Palestinians, some carrying green Islamic flags, turned out at Gaza's Jabalya refugee camp for what they called a victory march to celebrate the al-Mintar attack.
The march was organised by resistance groups in a sign of grassroots support for their defiance of Abbas' call for non-violence in the region.