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GAZA/JERUSALEM (Reuters) - U.S. Secretary of State Hillary Clinton on Wednesday pursued a Gaza truce, with Israel and Hamas still at odds over key terms, as Israeli air strikes shook the enclave and a bomb exploded on a Tel Aviv bus.

After talks in Ramallah with Palestinian President Mahmoud Abbas, Clinton held a second meeting with Israeli Prime Minister Benjamin Netanyahu before heading to Egypt, the main broker in efforts to end eight days of fighting and avert a possible Israeli ground offensive.

In Tel Aviv, at least 10 people were wounded when a bus was blown up on a main street near the Defence Ministry and military headquarters. Israel's government called it a terrorist attack.

The explosion, which police said was caused by a bomb placed on the vehicle, touched off celebratory gunfire from militants in Gaza and threatened to complicate truce efforts.

Israel's best-selling Yedioth Ahronoth newspaper said an emerging outline of a ceasefire agreement called for Egypt to announce a 72-hour ceasefire followed by further talks on long-term understandings.

Under the proposed document, which the newspaper said neither party would be required to sign, Israel would hold its fire, end attacks against top militants and promise to examine ways to ease its blockade of the enclave.

Hamas, the report said, would pledge not to strike any Israeli target and ensure other Palestinian factions in the Gaza Strip also stop their attacks.

An Israeli political source said differences holding up a deal centered on a Hamas demand to lift the Gaza blockade completely and the kind of activity that would be allowed along the frontier, where Israeli troops often fire into the enclave to keep Palestinians away from an area near a border fence.

Hamas official Ezzat al-Rishq said the main stumbling block was the temporary timeframe for a ceasefire that the Israelis want us to agree to .

GOOD INTENTIONS

The London-based Al Hayat newspaper, citing sources in Hamas and Islamic Jihad, said Israel wanted a 90-day period to determine good intentions before discussing Palestinian demands, a position the report said the groups have rejected.

Rishq said a short-term truce, whose proposed duration he did not disclose, would only buy (Israel) time until a general election in January and we would have accomplished nothing in the way of a long-term truce .

Hamas sources said the group was also demanding control over Gaza's Rafah borders with Egypt, so that Palestinians could cross easily, and Israeli guarantees to stop assassinating Hamas leaders.

Israel, one of the Hamas sources said, wanted a commitment from the group to stop smuggling through tunnels that run into Gaza under the Egyptian border. The tunnel network is a conduit for weapons and commercial goods.

News of the Tel Aviv bus bombing, the first serious blast in Israel's commercial capital since 2006, emerged just after Clinton and Netanyahu ended their meeting. A spokesman for Netanyahu declined to give details on their discussions, which followed talks on Tuesday.

Clinton, who flew to the region from an Asian summit, said in her public remarks after Tuesday's meeting with Netanyahu that it was essential to de-escalate the situation .

The rocket attacks from terrorist organizations inside Gaza on Israeli cities and towns must end and a broader calm restored, she said.

Clinton earlier assured Netanyahu of rock-solid U.S. support for Israel's security, and praised Egyptian President Mohamed Mursi's personal leadership and Egypt's efforts thus far to end the Gaza conflict and promote regional stability.

As a regional leader and neighbor, Egypt has the opportunity and responsibility to continue playing a crucial and constructive role in this process. I will carry this message to Cairo tomorrow (Wednesday), she said.

LONG-TERM SOLUTION

Netanyahu told Clinton he wanted a long-term solution. Failing that, Netanyahu made clear, that he stood ready to step up the military campaign to silence Hamas' rockets.

A band-aid solution will only cause another round of violence, said Ofir Gendelman, a Netanyahu spokesman.

While diplomatic efforts continued, Israel struck more than 100 targets in Gaza overnight, killing a Hamas gunman and destroying a cluster of Hamas government buildings.

Palestinians militants fired 31 rockets at Israel, causing no casualties, and Israel's Iron Dome interceptor system shot down 14 of them, police said.

Israel has carried out more than 1,500 strikes since the offensive began. Medical officials in Gaza said 139 Palestinians, most of them civilians, including 34 children, have been killed. Nearly 1,400 rockets have been fired into Israel, killing four civilians and a soldier, the Israeli military said.

In the West Bank city of Ramallah, Clinton held talks with Palestinian President Abbas, whose bid to upgrade the Palestinians' status at the United Nations, in the absence of peace negotiations with Israel, is opposed by Washington.

Secretary Clinton informed the president that the U.S. administration is exerting every possible effort to reach an immediate ceasefire and the president expressed his full support for this endeavor, said Palestinian chief negotiator Saeb Erekat.

Once the Israelis accept to stop their bombardments, their assassinations, there will be a comprehensive ceasefire sustained from all parties, Erekat said.

A Palestinian official with knowledge of Cairo's mediation told Reuters that Egyptian intelligence officials would hold further discussions on Wednesday with leaders of Hamas and the Islamic Jihad group.

There may be a response from Israel that Egyptian mediators want to present to Hamas and Islamic Jihad leaders, the official said. Let's be hopeful it would be something Palestinian factions can accept.

Like most Western powers, Washington shuns Hamas as an obstacle to peace and has blamed it for the Gaza conflagration. A U.N. Security Council statement condemning the conflict was blocked on Tuesday by the United States, which complained that it failed to address the root cause, the Palestinian rockets.

Hamas for its part is exploring the opportunities that last year's Arab Spring has given it to enjoy favor from new Islamist governments, and from Sunni Gulf powers keen to woo it away from Shi'ite Iran.

It may count on some sympathy from Mursi, although Egypt's first freely elected leader, whose Muslim Brotherhood inspired Hamas' founders, has been careful to stick by the 1979 peace deal with Israel struck by Cairo's former military rulers.

Along the Gaza border, Israeli tanks, artillery and infantry remained poised for a possible ground offensive in the densely populated enclave of 1.7 million Palestinians.

But an invasion, likely to entail heavy casualties, would be a major political risk for Netanyahu, who is currently favored to win the upcoming Israeli election. More than 1,400 Palestinians were killed in Israel's three-week war in the Gaza Strip in 2008-9, prompting international criticism of Israel.

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