(adds senior Tiger says not arrested, markets) By Ranga Sirilal COLOMBO, June 3 (Reuters) - Sri Lanka's Tamil Tiger rebels accused the army on Tuesday of killing six civilians in a roadside ambush as both sides wage a propaganda war. The rebels denied a report from Sri Lanka's military that they had arrested one of their own senior peace negotiators for treason as part of factional infighting, saying the government was spreading lies to distract from its own problems. The Liberation Tigers of Tamil Eelam (LTTE) said the claymore fragmentation mine attack took place deep in Northern rebel held territory on Monday night, coming amid a barrage of almost daily land, sea and air attacks by the military against the rebels. "Six civilians including two children were killed in a claymore by the Deep Penetration Unit of the Sri Lanka military," the Tigers said in an e-mail statement. It said four people were injured including three children. The military, which has already ousted the rebels from territory in the island's east and which is now trying to repeat the feat in their jungled northern heartland, said it was not involved, suggesting factional fighting within the Tigers might be to blame. "It happened in an uncontrolled area and therefore we deny our involvement in it," military spokesman Brigadier Udaya Nanayakkara said. Fresh fighting in the northern districts on Monday killed 10 rebels and three soldiers, he said. Independent confirmation of casualties figures is impossible, with media access to the battlefield refused. Nordic ceasefire monitors quit the country after Sri Lanka withdrew from an already collapsed 2002 ceasefire earlier this year. The rebels, who are fighting for an independent state in the north and east of the island for ethnic minority Tamils, were not available to comment on the most recent fighting. ECONOMIC WOES Sri Lanka's Defence Ministry website said the Tigers had arrested one of their own senior peace negotiators, head of the rebels peace secretariat Seevaratnam Puleedevan, saying he had been accused by the rebel intelligence chief of "treachery" as part of a power struggle. But in a message sent to Reuters via social networking site Facebook, Puleedevan -- one of a handful of English-speaking rebels who has represented them at a string of failed peace talks -- said he was still in position. "I am at the peace secretariat now," he said. "There is no truth in this news item. We can only laugh about these type of fabricated stories. (The) Sri Lankan state and their media are engaging false propaganda because they are unable to defeat the LTTE at the battlefront and at the same time facing diplomatic, political and economic or crisis in the south." Analysts say the military has the upper hand in the latest phase of the war given superior air power, artillery and strength in numbers. But they see no clear winner on the horizon, despite some 70,000 deaths since war began in 1983. Sri Lanka's stock market dipped on Tuesday on war and economic worries, while international credit rating agency Standard & Poor's warned the country risked a downgrade over deteriorating fiscal and debt indicators. Annual inflation has topped 25 percent in recent months. (Additional reporting by Peter Apps in London)
A man steers a makeshift raft through a flooded street at a village in Kalenimulla, Colombo, June 2, 2008. Floods triggered by torrential rain have killed at least 16 and forced ...
