* Rebels "not confident" about peace talks
* Fighting erupts in rebel-held town of Sake
* Regional leaders urge rebels to halt, withdraw
By Jonny Hogg and Richard Lough
SAKE/GOMA, Democratic Republic of Congo, Nov 22 (Reuters) - C ongolese troops were fighting back on Thursday against rebels who rejected calls from African leaders to quit the eastern city of Goma, captured earlier this week.
Thousands of people fled the area of clashes around the town of Sake, as M23 rebel fighters rushed from Goma to reinforce their positions there against an army counter-offensive.
The rebel movement, widely believed to be backed by Rwanda, has vowed to "liberate" all of the vast, resource-rich country after taking Goma, a provincial capital on the Rwandan border, ramping up tensions in a fragile region.
The head of M23's political arm, Jean-Marie Runiga, said the rebels would not retreat despite the call to do so from governments in central Africa, preferring to hold their ground until President Joseph Kabila opens direct talks with them.
"We'll stay in Goma waiting for negotiations," Runiga told Reuters in the city. "They're going to attack us and we're going to defend ourselves and keep on advancing."
Rebel fighters seized the sprawling lakeside city of a million people on Tuesday after government soldiers retreated and U.N. peacekeepers gave up trying to defend it.
The next day the rebels moved unopposed into Sake, a strategic town about 25 km (15 miles) west along the main road. It was there that government troops and allied militia were hitting back in fighting that flared up late on Wednesday.
Regional and international leaders have been scrambling to halt the fresh conflagration in the Great Lakes, a region of many colonial-era frontiers and long a tinderbox of ethnic and political conflict, fuelled by mineral deposits.
On Wednesday, foreign ministers from the states of the Great Lakes region demanded the rebels leave Goma and halt their advance, and Kabila - in a concession to the rebels that fell short of opening talks - promised to look into their grievances.
"I'm not confident, because I've already waited for three months in Kampala for talks," Runiga said of a recent spell in the capital of Uganda, which has tried to mediate in the Democratic Republic of Congo (DRC).
He said M23 wanted aid groups to return to Goma, after they evacuated during the fighting. Reuters correspondents saw some aid workers driving on Thursday in the city, which is the capital of North Kivu province.
The rebellion has triggered anti-government protests in Kinshasa and other parts of the country. On Thursday opposition figures seized on it to criticize Kabila's rule.
"Kabila is responsible for the suffering of the Congolese in Goma and in North Kivu. His leadership is weak," Bruno Mavungu, Secretary General of the UDPS party led by top opposition politician Etienne Tshisekedi, who says he is the rightful winner of a 2011 poll that handed Kabila a second term.
Thousands of residents fled Sake on Thursday, a Reuters correspondent there said, as gunbattles continued.
"It's no problem, it's just war," Vianney Kazarama, an M23 spokesman, said by telephone, adding that the clashes had begun late on Wednesday.
Several truckloads of M23 fighters sped toward Sake from Goma as the fighting raged on Thursday afternoon.
OCHA, the U.N.'s humanitarian coordination office, said about 140,000 people were now displaced in and around Goma as a result of fighting. It said power had to be restored to the town to avoid an outbreak of cholera.
M23 takes its name from a peace deal, signed on March 23, 2009, that was meant to bring former rebels into the national army, but which the group says the government has violated.
The group has since sought to broaden its support in Congo by tapping into popular frustrations over the government's slow pace of reform in one of the world's least developed and most turbulent nations.
But the effort has faced hurdles amid growing evidence of Rwanda's involvement in the insurgency.
Kabila's government insists the M23 rebellion is a creation of Rwanda, which has intervened repeatedly in Congo over the past 18 years. The claim is backed by U.N. experts who say Kigali is both commanding and supporting the insurgency in part to control the region's minerals.
Many of Rwanda's international allies, including the United States, Sweden, the Netherlands and the European Union have suspended some aid over the allegations.
Britain, which unblocked part of its frozen aid in September citing Rwandan efforts to solve the crisis, said it was now considering new evidence that could affect future aid.
"We judge the overall body of evidence of Rwandan involvement with M23 in the DRC to be credible and compelling," British Foreign Secretary William Hague said in a statement. "These allegations will necessarily be a key factor in future aid decisions to the Government of Rwanda."
The United Nations defended on Wednesday its failed effort to prevent rebels seizing Goma. Its helicopters had fired hundreds of rockets at the rebels but could not beat them back as their ranks had grown greatly, it said.
Runiga said M23 had the capacity to hang on to Goma, after its force was bolstered by mutinying Congolese soldiers from Kabila's army, the FARDC.
"Absolutely," he said. "Firstly we have a disciplined army, and also we have the FARDC soldiers who've joined us.
"They're our brothers, they'll be retrained and recycled then we'll work with them."