By Sahal Abdulle
MOGADISHU, April 24 (Reuters) - Shelling and artillery fire shook northern Mogadishu on Tuesday, the seventh day of fighting between allied Somali-Ethiopian forces and Islamist gunmen that has killed hundreds of people.
The government says the offensive will go on until it wipes out an insurgency frustrating its bid to restore central rule in the Horn of Africa country for the first time in 16 years.
As a suicide bomber attacked Ethiopian troops on the outskirts, terrified Mogadishu residents said neither side was gaining much ground in a battle for one small neighbourhood, an Islamist stronghold of bomb-shattered buildings.
"Most of the houses next to me have been shelled. I am lucky my house is still standing," said Omar Hussein who lives in the city near the scene of the heaviest clashes.
"I sometimes open my shop when the shelling subsides, but really it is only for a few hours a day."
The United States, which diplomats say has given tacit backing to Ethiopia's involvement in Somalia, urged all sides on Monday to reach a ceasefire, expressing concern over a growing humanitarian crisis.
The most sustained fighting in Mogadishu since the Somali-Ethiopian force defeated rival Islamists over the New Year has killed 293 people, local officials said.
Bodies lie rotting in the streets, and the number of government troops and Ethiopian soldiers killed is not known.
In Afgooye, a small town 30 km (19 miles) west of the city, a suicide car bomber blew up at an Ethiopian military base.
"I saw the Ethiopian soldiers shouting at this car to stop, then it exploded," local resident Abdi Hassan said.
LOOMING CATASTROPHE
Ethiopian troops ran from the scene, Hassan said, adding that he thought there were few casualties.
"It did not look like it caused much damage," he said.
Nearly half a million people have fled Mogadishu by foot, donkey and vehicle. Thousands are sleeping under trees or in the open in surrounding towns and villages like Afgooye.
The United Nations has warned of a looming catastrophe with disease rife among the hungry, exhausted population.
Prime Minister Ali Mohamed Gedi says his interim government is determined to crush fighters he says are linked to al Qaeda.
Residents say the violence has drawn in hundreds of militia from Mogadishu's dominant Hawiye clan, which opposes the role of Christian-led Ethiopian forces in Somalia.
"The rebel forces fighting the government and Ethiopian troops ... are from Hawiye clan and are clearly opposing the presence of the merciless Ethiopian troops," Hawiye spokesman Ahmed Diriye Diriye told Somali broadcaster Shabelle.
Four days of similar battles at the end of March killed at least 1,000 people, again mostly civilians. About 1,500 African Union peacekeepers have failed to stop the bloodshed.
Speaking in Eritrea, the former speaker of Somalia's parliament called on Washington to stop supporting Ethiopia.
"If the United States cuts its supports to these troops, Ethiopia will withdraw immediately. But if not, they will stay and the Somali people will continue resisting," Sheikh Sharif Adan Mohamed Nuur told Reuters in Asmara.
Adan was ousted in January after falling out with Gedi and President Abdullahi Yusuf over his links to the Islamists. (Additional reporting by Guled Mohamed in Nairobi and Jack Kimball in Asmara)