Israel will continue to honor a cease-fire in the Gaza Strip even though rockets are being fired from there toward the Negev at the rate of about two a day, the security cabinet decided Sunday. While the security cabinet did not issue any formal announcement, it did not okay the new rules of engagement that Defense Minister Amir Peretz wanted approved. Under these rules of engagement, the IDF would have been permitted to shoot at cells trying to fire rockets at Israel, or those endangering IDF units. According to government sources, Prime Minister Ehud Olmert, who was in favor of continuing to respect the cease-fire even in the face of Palestinian violations, told the security cabinet that Israel was "strong enough to allow the restraint to continue." According to these sources, Olmert feels that Israel can always take military action later, but now wants to give what he feels is the momentum created by the cease-fire - however imperfect - and his speech last week a chance to get off the ground. Both Olmert and Foreign Minister Tzipi Livni argued at the security cabinet that other considerations, not only security ones, needed to be taken into account, foremost international opinion. The two also said that the IDF tried unsuccessfully to stop the rocket fire over the last four months. After the security cabinet meeting, and prior to meeting EU foreign policy chief Javier Solana, Livni said, "Even before the cease-fire Sderot residents suffered from rocket fire." Livni said that it was important to "tell our friends in Europe that the cease-fire is broken on a continuous basis by the Palestinians, and that is something we are emphasizing. But it is equally important, because of our responsibility for the lives of Israelis, to take the right decisions with an eye on the future." Peretz and Internal Security Minister Avi Dichter, however, argued that Israel needed to respond to the rocket fire, even during a period of relative calm. Firing against terrorists about to attack Israel was the "very definition of self-defense," Dichter reportedly told the security cabinet. While the security cabinet did not accept Peretz's and Dichter's positions, it did not decide to extend the cease-fire to the West Bank, something Peretz has opposed. Despite arguing in the security cabinet for restraint, Olmert told visiting Austrian Foreign Minister Ursula Plassnik that Israel would not be able to restrain itself "much longer." Peretz, at the weekly cabinet meeting, said that the cease-fire in the Gaza Strip would not be extended to the West Bank, and that the IDF and Shin Bet (Israel Security Agency) operations there would continue. Peretz reported to the cabinet that the week-old cease-fire was generally holding, although 15 rockets have been fired on Israel since it went into effect. He said the rockets were launched from the northern Gaza Strip by a rogue faction of Fatah, and that this faction was being directed by Islamic Jihad with indirect assistance from Hizbullah. Peretz told the cabinet that the IDF's military pressure on the Palestinians, coupled with financial pressure, had led them to the decision that a cease-fire was in their interest. He said that the Palestinians viewed the cease-fire as a possibility for starting a process that could lead to lifting the economic sanctions imposed on the PA government. "The cease-fire could lead to the start of a number of processes, including a process that could lead to the freedom of Gilad Shalit," he said. Peretz also spoke of the arms smuggling that continued into Gaza, and said that this was the focus of talks last week in Jerusalem with Egyptian Intelligence Chief Omar Suleiman. "I made clear that the key to stability in the region was the success of Egyptian efforts to prevent the build-up of terrorist organizations, through increasing its activities on the Philadelphi Corridor," he said. Livni, who met Sunday with Plassnik, Solana and German Foreign Minister Frank-Walter Steinmeier, said that the message she was bringing to these meetings was that Israel had shown, through its agreement to the Gaza cease -ire and Olmert's Sde Boker speech, that it was not the intransigent party, and that there was a "diplomatic horizon." At the same time she said that she was pressing the Europeans not to water down the three benchmarks the PA government must meet before gaining international legitimacy - recognizing Israel's right to exist, forswearing terror, and accepting previous agreements - and not to renew financial assistance to the PA until it accepts these conditions.