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40 DIE IN FIERCE AMAL-HEZBOLLAH BATTLE

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Palestinian-backed Shiite Amal militiamen launched a major attack on a stronghold of the Iranian-financed Hezbollah in southern Lebanon Saturday, touching off a 5-hour house-to-house battle that killed 40 people, Moslem security sources said.

The sources said the dawn-to-noon fighting was the fiercest since the fundamentalist Hezbollah drove Amal out of the village of Jarjou, immediately adjacent to mountaintop positions of the Israeli-backed South Lebanon Army, last Monday.Some 300 Amal gunmen using rifles and shoulder-fired rockets - and backed by 250 guerrillas loyal to Palestinian leader Yasser Arafat - carried out the offensive, pushing forward to dislodge the Hezbollahis from Jarjou, the sources said.

They said at least 40 people were killed and 70 others wounded in the fighting, bringing the toll of 6 days of violence in the region to 95 dead and 240 wounded.

The Amal-PLO attack met with stiff resistance from the diehard extremists who clashed with the attackers in houses and alleyways of the village using small arms and hand-grenades.

Witnesses said Jarjou, once a tranquil resort village, became engulfed in a big black cloud as Amal and PLO gunners intensively blasted Hezbollah positions.

Fires raged out of control from burning houses and surrounding bushes as the deafening sound of heavy blasts echoed across the ravines of the Iklim Al Tuffah district, east of Sidon and 24 miles south of Beirut.

A witness, who requested anonymity, said the Amal and PLO fighters appeared to be gaining the upper hand in the early stages of the attack, gaining territory. But the extremists later launched counterattacks, pushing their rivals back to their original bases.