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Credit: Reuters/Handout MANILA | Wed Oct 19, 2011 2:25am EDT MANILA (Reuters) - Deadly fighting between Philippine soldiers and a group of Muslim separatists has forced thousands of people to flee their homes on southern Mindanao island and created a new problem for stalled peace talks to end the long-running insurgency. Twenty people were killed when army commandos clashed with the Moro Islamic Liberation Front (MILF) fighters near al-Barka town on Basilan on Tuesday, and both sides accused each other of breaking a seven-year truce. Al Rasheed Sakalahul, Basilan province vice governor, said the deployment of more troops, backed by helicopters and armored vehicles, had forced residents to flee their homes and farms. "They fear of getting caught in a crossfire if another encounter erupts," Sakalahul told reporters. Government officials said nearly 3,500 people had been displaced. A dozen soldiers were wounded and 10 others were missing, including six believed to have been taken captive by the rebels, army spokesman Colonel Arnulfo Burgos said. "We have protested it," Burgos told reporters. "We are exhausting two measures, one through the peace mechanism and another through security operations to recover them." The MILF has been negotiating with the government to end more than four decades of conflict that has killed 120,000 people, displaced 2 million and hobbled growth in the poor but resource-rich Muslim areas in the south. MILF chief negotiator Mohagher Iqbal told Reuters his group was concerned by a pattern of ceasefire violations by the military because it could threaten the negotiations. The military, however, said it did not violate the ceasefire on Tuesday as it was chasing a kidnapping gang, accusing the MILF of joining the fray. The rebels claimed the soldiers provoked them when they attacked guerrilla positions on Basilan. "The trust and confidence between the two sides are getting thinner," Iqbal said, adding he feared an escalation of violence that could further stall the talks. But the government tried to play down the latest fighting. Marvic Leonen, the government's chief peace negotiator, said the clash on Basilan was a "misencounter" between soldiers and rebels, describing it as an isolated incident. "The armed confrontation was not intended by both government and the MILF," he said. Leonen added that the two sides were preparing to resume talks next month in Kuala Lumpur. Malaysia is brokering the peace talks. The MILF are seeking a sub-state in the south of the mainly Catholic state, and in August rejected Manila's proposal to resolve the dispute. (Reporting By Manny Mogato; Editing by John Mair and Yoko Nishikawa) World Tweet this Link this Share this Digg this Email Reprints We welcome comments that advance the story through relevant opinion, anecdotes, links and data. 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