Ethiopian-backed Somali government troops and rival Islamists shelled each other with heavy artillery for a third day today, as the religious movement said it was now at war with Addis Ababa.
Persistent rocket, mortar and machinegun battles since Tuesday have boosted fears that a devastating Horn of Africa war, sucking in regional players and spawning suicide bombings across east Africa, may have arrived.
It is the most sustained combat so far between the rival Somali factions, struggling for control of a nation in anarchy since the 1991 ouster of dictator Mohamed Siad Barre, after two months of increasingly violent skirmishes.
Leader of Somalia's Islamic courts Sheikh Hassan Dahir Aweys
Both sides claimed to have killed hundreds, but there was no independent confirmation of casualties.
"We are at war with Ethiopia, but not with the (Somali) government," hardline Islamist leader Sheikh Hassan Dahir Aweys said.
His comments came hours after he called the fighting around the government's encircled stronghold, Baidoa, "a small incident" and a top European Union envoy said the two sides had agreed to stop fighting and resume peace talks.
The fighting started late on Tuesday, the deadline the Somalia Islamic Courts Council (SICC) had given Ethiopian troops protecting the government to leave the country or face holy war.
The shelling seemed to scuttle the shuttle diplomacy by European Union aid chief Louis Michel, who flew into Baidoa and Mogadishu, where he met Mr Aweys, to push the two sides back to the bargaining table.
Mr Aweys, who denies US and UN allegations he is linked to al-Qaeda, blamed Ethiopia for starting the fight: "If we are attacked we are not going to sit back."
The Somali government had no immediate comment.
Ethiopia remained officially silent on a declaration of war and again denied its combat troops were in Somalia, but has promised "to inform the world" if it decides to attack the SICC.