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By Alistair Lyon
Beirut - Hezbollah handed out bundles of cash on Friday to people whose homes were wrecked by Israeli bombing, consolidating the Iranian-backed group's support among Lebanon's Shi'as and embarrassing the Beirut government.
"People already had faith in Hezbollah, this will strengthen their faith," said Ayman Jaber, 27, with a wad of $12 000 in banknotes Hezbollah had given him.
Israeli and US officials have voiced concern that Hezbollah will entrench its popularity by moving fast - with Iranian money - to help people whose homes were destroyed or damaged in the 34-day conflict with Israel.
Hezbollah has not said where the funds are coming from to compensate people for an estimated 15 000 destroyed homes. The scheme appears likely to cost at least $150-million. The Lebanese government has yet to launch anything similar.
Several mass funerals took place in the south for at least 250 people killed during the war, including 30 in Srifa and 29, among them two Hezbollah fighters, in Qana, residents said.
"Thanks to Iran for standing beside the Lebanese," senior Hezbollah official Sheikh Nabil Kaouk told mourners in Qana, using the occasion to attack Washington.
"Americans, American administration: you are partners in massacres, you are partners in killing us, partners in destroying our country," he declared.
Lebanon's reconstruction chief said Israeli bombardment had inflicted a "disastrous" $3.6 billion worth of physical damage on Lebanon from which it could take years to recover.
Al-Fadl Shalaq, head of the Council for Development and Reconstruction, said the devastation from the 34-day conflict exceeded that caused by Lebanon's 1975-1990 civil war.
"I have witnessed all the wars in Lebanon but I have never seen a war this fierce and I do not see a response to clearing the rubble of war to match it," he told Reuters in an interview.
Trying to bolster a five-day-old truce, Lebanese troops moved deeper into the south and about 600 deployed in Shebaa village, near the Israeli-occupied Shebaa Farms enclave.
The Lebanese army has had no presence in the area since an Arab decision allowed Palestinian guerrillas to operate there nearly 40 years ago.
Israel's 1982 invasion expelled the Palestinians and Hezbollah took over the "Fatah-land" region after the Israeli military ended a 22-year occupation of the south in 2000.
The Shebaa Farms is a small patch of land claimed by Lebanon, but occupied by Israel since it captured the Golan Heights from Syria in the 1967 war. The United Nations deems the territory Syrian until such time as Syria cedes it to Lebanon.
On Thursday, the Lebanese army began deploying a force that will eventually number 15 000 soldiers south of the Litani River, about 20km from the border with Israel.
The same day France dealt a blow to hopes of building a strong UN force to back the army as Israeli troops withdraw.
The United Nations said it had received substantial troop offers, but was disappointed that France only planned to send 200 additional soldiers to a force it had been expected to lead.
Italy's government approved sending troops and the defence minister said his country might eventually lead the mission. Officials have said Italy might contribute up to 3 000 troops.
France's reticence to contribute more troops follows disastrous peacekeeping missions in the past. It lost 58 paratroopers to a suicide bomb attack in Beirut in 1983 and some 84 soldiers in Bosnia in the early 1990s.
French Defence Minister Michele Alliot-Marie recalled "the experience of painful operations where UN forces did not have a sufficiently precise mission or the means to react".
Hezbollah fighters have melted away as the Lebanese army arrived, but they have not left the south or given up the rocket launchers they used to bombard Israel during the conflict.
At least 1,183 people in Lebanon and 157 Israelis were killed in the conflict that erupted after Hezbollah captured two Israeli soldiers in a cross-border raid on July 12.
Israeli soldiers killed at least three Palestinians on Friday and wounded two others in confrontations in Gaza and the occupied West Bank, medics and witnesses said.