זעלבסטמערדער עקספלאזירט זיך אין תל אביב, נווה שאנן

But a Palestinian suicide bomber ripped apart the holiday spirit, a reminder that Israel's recently elected government faces major challenges ahead.

At least nine people were killed in Monday's attack at a falafel stand near Tel Aviv's old central bus station; dozens more were wounded.

Witnesses said a young man set off explosives in his bag after he was stopped by a security guard, who was on alert after previous bombings at the site.

''I know the owners of the place, so I ran to see what had happened,'' Avi Zecharia said. ''There were bodies everywhere. It was horrible.''

Islamic Jihad claimed responsibility for the attack. There was a rival claim from the Al-Aksa Brigade, the terrorist wing of Palestinian Authority President Mahmoud Abbas' Fatah movement.

Abbas issued a condemnation, but Hamas, which now runs the Palestinian Authority, called the bombing an act of ''self-defense.''

It was the first major Palestinian attack in Israel since Hamas assumed power in the West Bank and Gaza Strip last month. Other attacks have been thwarted by Israeli security services.

Israeli officials have threatened to target Hamas' leadership in retaliation for a resurgence of terrorism, but Prime Minister Ehud Olmert, who is still steering his centrist Kadima Party through coalition talks, took a cautious tack.

''We will hold consultations and decide on how and when to respond,'' he told his parliamentary faction. ''We will know how to respond in the way and manner required, and we will continue to act with all means at our disposal to thwart'' further attacks.

Within two hours of the bombing, Israel's 120 new lawmakers convened in the Knesset for a somber swearing-in ceremony.

''We find ourselves faced with decisions that will be among the most important in the State of Israel's history,'' President Moshe Katsav told lawmakers.

He was referring to Olmert's plan to follow up on last year's Gaza Strip withdrawal by evacuating West Bank settlements and setting Israel's border unilaterally.

Olmert has called his ''convergence plan'' a stopgap measure in the absence of a Palestinian peace partner.

While the Tel Aviv bombing may have borne that out, it also could make governing more difficult for Olmert.

Several parties that the prime minister may want to court for his coalition have voiced misgivings at the idea of West Bank territorial withdrawals. In an early sign of dissent, the head of the Sephardi Orthodox Shas Party, a potential partner, did not attend the Knesset ceremony, saying he preferred to visit wounded bomb victims.