A town in shock at the barrage from Hizbollah

Rosa Goldenberg, 85, who lives next door to the family of Ehud Goldwasser, one of the two Israeli soldiers captured on the border of Lebanon on Wednesday, summed up her feelings: "I am heartbroken. He was an outstanding boy."

Saying that she had attended all the circumcisions and bar mitzvahs of Ehud, 31, and his two brothers, Mrs Goldenberg added: "He was a good friend of my grandson. I have just heard the news that they think he's alive, thank God."

The peaceful coastal town of Nahariya in the far north of Israel, with its tree-lined streets, ice cream parlours and long, quiet, sandy Mediterranean beach, hardly feels like a war zone - at least between the Katyusha volleys.

Here there is none of the destruction wrought in Gaza in the past fortnight. The two civilian deaths in the region yesterday are dwarfed by those in Lebanon. True, the roads are unusually empty of traffic - apart from those heading south. But some coffee shops remain full and open, many of their patrons transfixed by the television news on what is happening here and to the north.

This is a town in shock for two reasons. One is the discovery that one of their own, Mr Goldwasser, a 31-year-old reservist who got married about a year ago, is one of the two captured soldiers. And the second is the two big volleys of Katyusha rockets, launched into the town by Hizbollah militants yesterday, one of which killed a woman as she sipped early morning coffee on her fourth-floor balcony.

The attacks are on a scale unknown here for a quarter of a century. Last night a salvo exploded close to the town's main hotel. Black smoke billowed upwards as a missile exploded a couple of blocks away.

The mangled balcony railings outside Monica Zeidman's top-floor flat in a modern block, and the still uncleared debris and broken glass on the ground, four floors below testified to the moment the Katyusha rocket struck. Local residents said the Argentine-born Mrs Zeidman had not heeded a call by local police to go into the secure room that each flat contains, and had been toppled by the blast on to the balcony a floor below.

Danny Pincus, 27, who lives opposite and has a jewellery shop in the town, said he had heard the whoosh of the Katyusha before the explosion that killed his neighbour.

"There was [a rocket] about a year ago but we have had nothing like this since [the Lebanon war in] 1982," he added. "I have taken my wife and kids to my sister in Tel Aviv. If there's one more rocket I'm going to Tel Aviv too."

In the town's hospital, patients were being transferred to a new and hitherto unused underground complex of wards. The sense of normality overturned was underlined by one of the injured, Shimon Shechter, 43, who stopped at traffic lights while driving to his construction job. "There were a few cars in front of me. Suddenly I hear a whistling noise and I thought it must be a Katyusha. There was a huge explosion and then I saw dark in my eyes. I looked down and saw that I was bleeding."

Mr Shechter, who had a piece of shrapnel lodged in his sinus, added: "There is no easy solution but the army have to push Hizbollah back as far as possible so that the range of the Katyushas is far from Israel. Until now I don't think they did enough to stop this happening - but I think they will now."

Gershon Reuben, 46, another of Mr Goldwasser's neighbours, described his family as "quiet" and explained that his father - returning here with his wife last night - was abroad most of the year as an employee of the Israeli shipping line Zim. Saying that he only knew Mr Goldwasser, also known as "Udi", well enough to greet him in the street, he insisted that Israel should not negotiate the release of prisoners in either Gaza or Lebanon with the soldiers' militant captors - not least because he believed they were already dead.

But as Nahariya braced itself for more Katyushas, Mrs Goldenberg was having no such pessimism about the soldier's fate. "With the help of God alone, they they will get him back. We can't leave him behind," she said.