"Hamas has begun internalizing the scope of the physical and moral blow. Despite its bragging in the medial, self-examination of its operational failures has begun," said Military Intelligence Chief Amos Yadlin at Sunday's cabinet meeting.
Major-General Yadlin also offered explanations for the shooting incidents and the renewed rocket fire on southern Israel. "Two weeks after the ceasefire, terrorists that are not Hamas are challenging Hamas and carrying out attacks for a renewed escalation.
"Hamas, for its part, has been deterred and is honoring the ceasefire, but is not deterring the others enough," he said.
Sunday morning saw four mortar shells fired at the western Negev. In addition, three Qassam rockets were fired at around 6:50 am, with one falling between two kindergartens in Eshkol Regional Council, where no Color Red siren was sounded.
Around 9 am Palestinian gunmen fired gunshots at IDF forces near the border fence in the Kissufim area. The troops responded with fire and there were no injuries in any of the incidents.
Yadlin said, "Operation Cast Lead contributed to the Israeli deterrence and started a lesson-learning process among members of the "radical axis."
"Hamas is trying to cut back on damages and is focusing on new challenges – first of all settling their conditions, rehabilitating the crossings and working to renew the arms smugglings.
"The rehabilitation efforts are viewed as an opportunity for inter-Palestinian reconciliation that would allow it to realize its ambition to overcome the PLO and eliminate the two-state solution."
'Hizbullah still deterred'Yadlin also commented on activity on the northern front, saying, "Hizbullah in Lebanon is still deterred and restrained, because of its commitment to the Lebanese electoral system, Israeli deterrence, the process of rebuilding strength that is yet to be complete, and its commitment to Iran.
"On the one hand, Hizbullah is driven by its desire to carry out an attack as revenge for the death of (Imad) Mughniyah at the start of February, in which two days will mark the assassinations of Abbas al-Musawi and Imad Mughniyah, but they do not want to start a war."
On the Iranian nuclear issue Yadlin said Tehran was "continuing in its clear and unequivocal path towards becoming nuclear".
Yadlin said Iran continued to accumulate hundreds of kilograms of low-grade enriched uranium. "It is trying to buy time by talking with the West, while trying to advance with its nuclear bomb capabilities," he said.
Sunday morning's attack on southern Israel were addressed in the cabinet meeting, during which Prime Minister Ehud Olmert, after hearing Yadlin's briefing said, "We need a response, and the response won't be a light one, because we cannot afford an escalation similar to what we had before."
Minister Rafi Eitan (Pensioners Party) said during the meeting, "I want to understand what our response policy is. If we said that the smuggling and firing demand a response, then we need to respond."
Vice Premier Haim Ramon (Kadima) was more emphatic, saying "if the smuggling and firing are continuing, then we should draw the conclusion that we will not be able to overcome the goings on in Gaza as long as Hamas continues to rule there. I call for an immediate and definitive response."