Egypt appears to hold the key to the solution of the Gaza crisis as the Israeli government waits for an improved ceasefire deal before ending Operation Cast Lead.

The IDF has indicated that it is prepared to escalate the ground offensive by reinforcing the units already operating in the Strip and entering Gaza City. However, the army high command and Defence Minister Ehud Barak are opposed to such a move as it may result in higher casualties.

Mr Barak is worried that the longer large forces remain in the crowded urban areas of Gaza, the higher the chances of operational accidents, such as those in which four IDF soldiers were killed on Monday, as well as the risk of hitting big civilian targets such as the UNRWA school that was hit by mortars on Tuesday, killing at least 45 Palestinian civilians sheltering there.

His Security Cabinet opponents include Prime Minister Ehud Olmert and Foreign Minister Tzipi Livni, who insist that Israel cannot let up pressure on Hamas until offered a better deal than the various ceasefire arrangements offered by France, Turkey and Egypt.

The current deals all focus on an immediate ceasefire followed by talks on a comprehensive plan. Mr Olmert and Ms Livni are still feeling stung over the criticism they drew following UN Resolution 1701 after the Second Lebanon War, which was seen as a diplomatic defeat for Israel. They are determined now to hold out for a better deal.

The main pressure is on Egypt, which controls the border area around Rafah beneath which arms have been smuggled through hundreds of tunnels. The Egyptian government is refusing to agree to the deployment of an international force with engineering capabilities and the autonomy to demolish tunnels, and is insisting Israel agrees first to a ceasefire.

The Israeli government, however, has so far only agreed to brief, local cessations in firing to allow humanitarian convoys into the Strip. In its meeting on Wednesday, the Security Cabinet delayed a decision on the next military stage.

But the international pressure intensified following the bombing of the UNRWA school and the discouraging signals from the USA, which initially supported Israel.

Secretary of State Condoleezza Rice announced in New York that she supported the Egyptian plan and President-Elect Barack Obama indicated his displeasure by saying that “the loss of civilian life in Gaza and Israel is a source of deep concern, and after January 20 I am going to have plenty to say about the issue.”

From an operational point of view, the IDF high command views Cast Lead as a success. While Hamas continued to fire around 30 rockets a day, they were badly aimed and were seen as an act of desperation. But both Israel’s political and military leadership know that their options are now limited.