By Abdi Sheikh and Abdi Guled
MOGADISHU (Reuters) - Ethiopia denied reports from Somali residents and media on Tuesday that it had sent soldiers back into the neighbouring Horn of Africa country, where hardline Islamist rebels are battling Somalia's government.
Ethiopia invaded in late 2006 to help the interim Somali government topple an Islamist movement controlling the capital and much of the south, but withdrew its troops this year.
"This is a totally fabricated story. We have no plans to go into any of Somalia's territory," Wahade Belay, spokesman for Ethiopia's Foreign Ministry, told Reuters in Addis Ababa.
Citing witnesses in the area, all the main Somali language websites and radio stations were on Tuesday running stories saying there had been an Ethiopian incursion.
On Monday, Ethiopia said it was watching events closely but felt the situation was contained within Somalia and that there was no immediate danger that would prompt intervention.
Residents near the central town of Baladwayne said Ethiopian troops in military vehicles arrived before dawn on Tuesday.
"Some of their soldiers were on the hills ... We do not know what they want. They have not spoken to anyone," local man Hussein Osman told Reuters by telephone.
"We believe they are concerned about the al Shabaab (rebels) flowing into our region."
Ismail Hassan, another resident, said the Ethiopian soldiers were accompanied by some former Somali government officials.
"They were on the outskirts of Baladwayne," he said.
REBELS GAIN GROUND
Islamist insurgents, including the hardline Shabaab group, have gained ground during two weeks of Somalia's heaviest fighting for months. Local human rights workers say the clashes have killed at least 175 civilians and wounded more than 500.
Forces loyal to President Sheikh Sharif Ahmed control only parts of Mogadishu and the country's central region.
His U.N.-backed administration is the 15th attempt in 18 years to set up central rule in Somalia. Neighbouring states, including Ethiopia, and Western security forces fear the nation could become a haven for al Qaeda-linked extremists.
Ahmed was chairman of the Islamic Courts Union that ran Mogadishu in 2006 before Ethiopian troops, wary of having an Islamist state next door, invaded and ousted them from power.
Since the Ethiopians intervened, fighting has killed at least 17,700 civilians and driven more than 1 million from their homes. More than 3 million people survive on emergency food aid.
Ethiopian soldiers quit Somalia at the start of this year, but some rebels have continued attacking the new government and a small African Union peacekeeping mission in the capital.
Somali pirates have also taken advantage of the chaos to launch ever bolder attacks on shipping. Nearly 30 hijackings this year have put it on course to be the worst ever.
Hassan said Baladwayne residents had expected Ethiopian forces to return since Shabaab fighters entered the area.
"We hope they will at least push back the al Shabaab. These so-called Islamists have forced us to love Ethiopians," he said.
(Additional reporting by Barry Malone in Addis Ababa; Writing by Daniel Wallis; Editing by Giles Elgood)
