MINGORA, Pakistan,(Reuters) – Pakistani troops killed 35 militants in fighting in the Swat Valley northwest of Islamabad on Saturday, shortly after a suicide car-bomber killed eight policemen.

Mounting violence is adding to a sense of urgency for a fractious coalition government to end infighting and turn its attention to security and pressing economic problems.

Insecurity, combined with uncertainty over the future of the government and worry about the economy, has undermined investor confidence and sent the country’s financial markets on a downward spiral.

The fighting in Swat broke out when militants ambushed a security patrol, a military official said. “Four of our soldiers have been martyred while we killed 35 militants and damaged several of their hideouts,” said Major Nasir Ali, from the military’s information department.

Earlier, a suicide bomber rammed an explosive-laden vehicle into a police station in the valley, killing at least eight policemen and wounding 10, police said. “A lot of people are still under the rubble. We have recovered eight bodies,” said Subhan Khan, a senior police officer in the valley.

A spokesman for Taliban militants in the valley claimed responsibility for the blast and vowed to carry out more strikes if the government did not stop military operations in the region.

Nuclear-armed Pakistan is on the front line of the U.S.-led war against terrorism and al Qaeda-linked militants have unleashed a wave of violence across the country over the past year against the security forces.

Separately, militants killed two civilians and wounded three children in a bomb attack near a security checkpost in Barikot, to the west of Mingora, the valley’s main town.

The valley had been one of the country’s main tourist destinations until last year when Pakistani Taliban fighters infiltrated from enclaves on the Afghan border to support a radical cleric bent on imposing hardline Islamist rule.

Separately, a small bomb planted on a motorcycle wounded two policemen in the southern city of Karachi, police said.

In another incident, the bodies of two men were found in North Waziristan, a militant sanctuary on the Afghan border, with a note saying they had been killed because they were spying for U.S. forces in Afghanistan.

Violence subsided in Pakistan when a coalition government came to power after an election in February and opened talks with militants. In May, authorities in North West Frontier Province reached a peace deal with militants in Swat. But attacks intensified again across the northwest, including the Swat Valley, after top Pakistani Taliban leader Baitullah Mehsud suspended talks in June.

On Thursday, two suicide bombers killed about 70 people outside the country’s main defence industry complex near Islamabad.

The resignation of staunch U.S. ally Pervez Musharraf as president on Monday has raised questions about the government’s commitment to tackle violence. But while Musharraf’s support for the U.S.-led war on terrorism was deeply unpopular, the government has vowed to keep up efforts to fight the militants.