Somalia is in "a state of war," the country's Islamic leader said Thursday as a transitional administration backed by Ethiopia battled advancing Islamic forces.

The fighting threaten to spiral into a major conflict in this volatile region, pitting Ethiopia against its bitter rival, Eritrea, which is accused of supporting the Islamic militia.

Analysts believe Ethiopia may soon raise the stakes by deploying attack helicopters in support of the secular administration set up in the garrison town of Baidoa, the only town the transitional government controls.

An Associated Press photographer saw 19 bodies of Islamic fighters in Moode Moode, a town 15 kilometres from Baidoa, where fighting took place Wednesday.

Three Islamic fighters were captured. One, 25-year-old Aweys Hassan Ma'alim, said he had been forced to fight by the Islamic movement.  

Picture: Sheik Ibrahim Suley, left, the general secretary of Shura council of the Islamic Courts speaks to Sheik Abdirahim Mudey, the spokesman of the Council of Islamic Courts, in Mogadishu, Thursday, after they spoke to journalists about the on-going fighting in Baidoa.

Another, Adan Abdullahi Mohammed, said he wanted to fight Ethiopians and "die for the sake of Allah in jihad."

Meanwhile, Sheikh Ibrahim Shukri Abuu-Zeynab, a spokesman for the Council of Islamic Courts, said the Islamic military had captured the town of Idale, 60 kilometres southwest of Baidoa, and killed 200 Ethiopian troops. The claim could not be verified.

"All Somalis should take part in this struggle against Ethiopia," Sheik Hassan Dahir Aweys, an Islamic leader, said in a interview with The Associated Press.

Three days of clashes between the Islamic fighters and government forces, newly trained by Ethiopian troops, have left more than 100 people dead.

Ethiopia denies its forces are fighting, but says it has deployed several hundred military trainers in support of the transitional government.

UN officials say as many as 8,000 Ethiopian troops may be in Somalia, while Eritrea reportedly has 2,000 troops deployed. The two countries, which fought a bitter and still unresolved border war in 1998, deny the UN assertions.

European Union envoy Louis Michel, in response to a question about Eritrean and Ethiopian involvement, replied: "Somalia is suffering because some are using Somalia as a battlefield for other issues."

Somalia has not had an effective central government since 1991 when warlords overthrew dictator Mohamed Siad Barre, then turned on one another.

The transitional government, which includes a number of ex-warlords, was formed in 2004 with UN backing but largely ignored until the warlords were driven from Mogadishu last summer by the Islamic militia.

On Wednesday, Aweys told Michel he was willing to return to peace talks with the Baidoa group. But on Thursday, he said "the country is in a state of war."

In Ethiopia, the government said Wednesday that the Islamic group was warmongering and not interested in peace. "Ethiopia has exerted efforts . . . for the peaceful resolution of the problem in Somalia," the statement said.

Salad Ali Jelle, deputy defence minister with Baidoa administration, told reporters that 71 Islamic fighters had been killed and 221 wounded so far during clashes near Baidoa. Three government troops were killed and seven injured, Jelle said.

Separately, witnesses in the town of Bur Haqaba, which is controlled by the Islamic movement, reported hearing mortars, anti-aircraft missiles and rocket-propelled grenades being fired Thursday.

After returning from Somalia late Wednesday, Michel said skirmishes were likely to continue, but said both sides had broadly agreed to ease tensions and hold new talks in Sudan.

The interim government holds only a small area around the central town of Baidoa. The Islamic militia controls the capital, Mogadishu, 140 kilometres to the south, but has also fanned out across most of southern Somalia.

The transitional government has rejected religious rule. Muslim leaders have insisted on an Islamic government.

As well, the United States accuses the Islamic movement of having ties to terror groups, something Islamic leaders deny.