NATO on Monday admitted carrying out an air strike on a military target in the Sorman area west of the capital as the Libyan regime said that 15 people, including three children, were killed in the attack.

The government spokesman slammed as a "cowardly terrorist act which cannot be justified" an attack on an estate of a veteran comrade of leader Moamer Kadhafi.

NATO, reversing an initial denial, acknowledged its warplanes hit Sorman but insisted the target was military, a precision air strike against a "high-level" command and control node early on Monday.

"This strike will greatly degrade Kadhafi regime forces' ability to carry on their barbaric assault against the Libyan people," said Canadian Lieutenant General Charles Bouchard, commander of NATO operations in Libya.

"Wherever Kadhafi tries to hide his command and control facilities, we will find them and destroy them."

A NATO official said the alliance was aware of regime allegations that 15 people, including three children, were killed but had no way of verifying them.

Another official had said earlier the alliance had not conducted any air strikes in the Sorman area, 70 kilometres (45 miles) from Tripoli.

Journalists escorted there by authorities saw damaged buildings on the sprawling estate of Khuwildi Hemidi, who served on the Revolution Command Council Kadhafi created when he seized power in 1969.

Reporters were also taken to Sabratha hospital some 10 kilometres from Sorman, where an AFP correspondent saw nine bodies, including two children. They also saw body parts including a child's head.

A second Libyan official charged that eight missiles had struck the estate at 4 am (0200 GMT).

He said most of the dead were members of Hemidi's family, including two of his grandchildren. Hemidi himself escaped unharmed, the official added.

The new Libyan claim of civilian deaths came just hours after NATO acknowledged that one of its missiles had gone astray early on Sunday, hitting a residential neighbourhood of Tripoli.

Reporters were shown the bodies of five of the nine people Libyan officials said were killed in that strike, including a woman and two toddlers.

The Libyan government spokesman insisted there were no military targets anywhere near the Al-Arada district of Tripoli that was hit.

NATO's admission was a major boost to the credibility of the Libyan regime two weeks after after officials showed journalists a little girl in hospital they said had been wounded in an air strike, only for a member of medical staff to say she had been injured in a traffic accident.

It was also an embarrassment for the alliance which has led the bombing campaign in Libya under a UN mandate to protect civilians.

But rebels fighting Kadhafi's four-decade rule blamed the veteran strongman for the deaths, charging that his forces deliberately stashed arms in schools and mosques.

"We are sorry for the loss of civilian life," said rebel spokesman Abdel Hafiz Ghoga, adding: "We hold the Kadhafi regime responsible for having placed military armaments and rocket launchers near civilian areas."

Italy warned that NATO's accidental killing of civilians was endangering the alliance's credibility.

"NATO's credibility is at risk," Foreign Minister Franco Frattini told reporters on the sidelines of a meeting of European Union foreign ministers in Luxembourg.

"We cannot run the risk of killing civilians. This is not good at all."

At the Luxembourg meeting, the EU foreign ministers urged the use of frozen funds to finance Libya's opposition.

The bloc said in a statement that it "acknowledges the urgent financial needs of the Transitional National Council" (TNC) and said the aid "where possible" could include "the use of frozen Libyan funds," while respecting international law.

On Monday, the central bank in the United Arab Emirates froze the assets of 19 Libyan figures in line with UN sanctions against Kadhafi's regime.

The rebels have warned they are running out of money as their struggle enters a fifth month and called on governments in the NATO-led coalition to make good their promises of funds.

They have not yet received any of the roughly one billion dollars promised by international donors earlier this month, and urged benefactors to make good on their promises to provide funds, Ghoga said.

Meanwhile, 22 security personnel who defected from Kadhafi's forces in south Libya claimed on Monday they were directly ordered not to give captured rebels the rights of normal prisoners.

Four representatives of officers from the deep south told reporters in Benghazi they had been ordered to "show no mercy to prisoners," who, they were told, were rebels linked to Al-Qaeda.

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