BIR-AYYAD, Libya: Moammar Gadhafi vowed to stay on and warned that NATO would “face catastrophe” if airstrikes did not cease in an audio address carried by Libyan television and broadcast to tens of thousands of supporters who gathered in Tripoli’s Green Square Friday.

“We advise you [NATO] to retreat before you face a catastrophe,” Gadhafi told the crowd of supporters who waved green flags and posters of the Libyan leader.

“I advise you to ground your planes … and to hold discussions with the Libyan people,” Gadhafi said, denouncing an arrest warrant against him issued Monday by the International Criminal Court.

Libyan rebels who had advanced to within 80 kilometers of Gadhafi’s stronghold in the capital were forced to retreat Friday after coming under a barrage of rocket fire from government forces.

The rebels’ advance five days ago to the outskirts of the small town of Bir al-Ghanam had raised the possibility of a breakthrough in a four-month-old conflict that has become the bloodiest of the “Arab Spring” uprisings.

Rebel fighters who had been massing on a ridge near Bir al-Ghanam and preparing for an attack were now pulling back under fire from Russian-made Grad rockets, said a Reuters photographer in Bir-Ayyad, 30 kilometers to the south.

He said the rocket barrage was now reaching as far back as Bir-Ayyad, a road junction in the foothills of the Western Mountains range south-west of Tripoli from where the rebels had launched their advance last week.

The reversal underlines the resilience of Gadhafi’s forces, who have withstood 15 weeks of bombardment by NATO missiles and warplanes, and attempts by rebels on three fronts to break through their lines.

Frustration at the slow progress is growing inside the military alliance, with some members worried about the cost, civilian casualties and the fact the campaign has now been going on much longer than its backers anticipated.

There are also differences about how proactive NATO members should be in aiding the rebels, who are hampered by a lack of organization and a shortage of equipment.

France this week became the first member of the anti-Gadhafi alliance to acknowledge that it had supplied weapons to the rebels, saying this was justified to protect civilians under threat from Gadhafi’s forces.

It said it used parachutes to drop assault rifles and rocket launchers, along with humanitarian supplies, to rebels in the Western mountains.

Libyan state television reported that NATO had bombed military and civilian sites in the government-controlled town of Garyan, on the eastern edge of the Western Mountains. NATO said it had successfully destroyed a military target in the town Friday.

“It should be noted that the target was well outside the built-up area of the conurbation and no collateral damage was observed afterward. At no time was any civilian area targeted,” a NATO official said.

Gadhafi’s daughter, Aisha, said in a television interview broadcast late Thursday that her father’s administration was prepared to cut a deal with the rebels if that was what it took to stop the bloodshed.

“There are direct and indirect negotiations and we should stop letting Libyan blood,” she said in an interview with France 2 television.

“And for that we are ready to ally with the devil and that is the armed rebels,” said Aisha Gadhafi, a lawyer who has no official government role but has often acted as a mediator on behalf of her family.

Although the offer marked a shift in tone, Gadhafi again dismissed the Libyan rebels as “traitors, a fifth column and mercenaries” in his telephone address Friday.

The London-based Ash-Sharq al-Awsat newspaper reported Gadhafi’s representatives had been meeting officials from France and Britain on the Tunisian island of Djerba.

Citing unidentified sources from the Gadhafi and opposition camps, the paper said Gadhafi was willing to step down if he was spared prosecution and allowed to live in his hometown of Sirte, northern Libya, with guarantees for his security.

Rebels rejected talks with the Libyan leader after the ICC issued its arrest warrants, saying there was no point talking to a war criminal.

Some Libya-watchers say Gadhafi has floated the possibility of a peace deal several times to stall for time and weaken the resolve of the Western alliance to push him out.

But others say he may be looking for a negotiated exit as his options narrow.