* Insurgents threaten attack on Ethiopia
* Hardliners behead two residents, shot clan chief

By Mohamed Ahmed


MOGADISHU, June 30 (Reuters) - Somalia's Islamist rebels threatened on Tuesday to attack Ethiopia after repeated witness reports that Ethiopian troops were back in the chaotic Horn of Africa country they withdrew from in January.

Ethiopian troops invaded Somalia in 2006 to oust an Islamist movement from the capital in which new President Sheik Sharif Ahmed played a role. That sparked an Islamist insurgency which is still raging despite their withdrawal.

"I'm telling the people that it's time we attacked Ethiopia, who are our Christian neighbours," Sheikh Abdiqani Mohamed Yusuf said on a radio station controlled by the al Shabaab rebels in the southern port of Kismayu.

"We have to invade their country, like they did to our country. This is our best chance," he said. "The people should be ready to take part in jihad."

Ethiopian Prime Minister Meles Zenawi said last week possible suicide attacks in Ethiopia by Somali Islamist rebels were a threat he "didn't expect to go away any time soon".

Witnesses have said heavily armed columns of Ethiopian troops have crossed the border and are in several parts of Somalia. The Ethiopian government has repeatedly denied that.

President Ahmed, a moderate Islamist, fled into exile after the Ethiopian intervention but joined a peace process last year and was elected in January. His government is battling hardline insurgents who were once allies in the Islamist movement.

BEHEADINGS

Addis Ababa has said it supports the new government, but is wary of the hardline Islamists, who are seen as a proxy for al Qaeda, because they control large areas of Somalia and have threatened to destabilise neighbouring Ethiopia and Kenya.

With reports of foreign jihadists streaming into Somalia, Western security services are worried al Qaeda may get a grip on the failed Horn of Africa state that has been without central government for 18 years.

Violence from the Islamist-led insurgency has worsened this month, with a minister, the Mogadishu police chief, and a legislator killed.

Al Shabaab wants to impose a strict version of sharia law, at odds with a more moderate version followed by most Somalis.

Al Shabaab cut a hand and a foot each off four thieves in Mogadishu last week and paraded the limbs in the streets.

On Tuesday, the hardline insurgents beheaded two residents and shot dead a clan chief in Wajid district of Bakool region in which borders Ethiopia in southern Somalia, witnesses said.

Another man was beheaded in the region on Monday.

The government, which controls little but a few blocks of the capital, has declared a state of emergency and appealed to neighbouring countries for military assistance.

Ethiopia's Meles has not ruled out sending troops to Somalia if Ethiopia is threatened but says he is waiting to see how the international community responds to the deteriorating security situation in the country. (Writing and additional reporting by Barry Malone in Addis Ababa; additional reporting by Abdi Guled in Mogadishu; editing by David Clarke)


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