Congo rebels abandon last town, withdraw to hills BUNAGANA, Democratic Republic of Congo (Reuters) - Civilians celebrated in the streets on Wednesday as Congolese troops entered the eastern border town of Bunagana after a major new success in their offensive to crush a 20-month rebellion. The town was the first seized last year by M23 rebels in the Democratic Republic of Congo and the last they held after being forced back recently by Congo's U.N.-backed army. A Reuters reporter in Bunagana said residents flocked onto the streets to cheer the arrival of Congolese government troops, calling them liberators. I'm very happy, we've been under occupation for a long time. We felt very threatened by M23, we were constantly surrounded by their soldiers," said a resident who gave his name only as Damien. The rebels appeared to have withdrawn before the army arrived. Roger Lumbala, a former member of parliament who is a senior member of the M23 negotiating team at peace talks in Uganda, confirmed the rebels had pulled back but said this was due to diplomatic pressure rather than military defeats. Lt. Col. Paddy Ankunda, a spokesman for Uganda's army, said delegations from both sides were holding talks in Uganda despite events on the ground. Bunagana was strategic during the rebellion, allowing the M23 to control lucrative cross-border taxation and giving them access to Uganda and Rwanda, which are accused by U.N. experts of backing the rebels, something both nations deny. A combination of diplomatic pressure on Rwanda, a beefed up U.N. mission and a much-improved Congolese army compared to last year when rebels seized Goma, appears to be bearing fruit. "While M23 is not yet fully defeated, there is little doubt that it has suffered a crushing military loss," Darren Olivier wrote on the African Defence Review website. Analysts and diplomats say M23 fighters will have pulled back to the steep, mountainous hills near the meeting point of Congo, Rwanda and Uganda's borders, an area they know well. M23 is the latest incarnation of insurgents led by Tutsis in eastern Congo fighting the Kinshasa government following the end of Congo's last major war a decade ago. Millions have died in fighting or from hunger and disease linked to the conflicts. While Congo's political and military leaders have appeared eager to impose a military solution on rebels this time, government spokesman Lambert Mende said on Wednesday that Kinshasa was ready for further talks. Some nations, including the United States and Rwanda, have warned of further violence if no diplomatic solution is found. However, the thorny question of whether to grant amnesties to insurgents has been a sticking point in talks. Fatou Bensouda, prosecutor at the International Criminal Court, issued a statement on Wednesday warning all sides she was closely monitoring the conflict. "There can be no amnesty, no immunity, and no impunity for these crimes," she said. The government and the United Nations have accused the rebels of massacring civilians and using child soldiers. Additional reporting by Pete Jones in Kinshasa, Chrispin Mvano in Goma, Elias Biryabarema in Kampala, Bate Felix in Dakar, Sara Webb in Amsterdam; Additional reporting and writing by David Lewis; editing by Barry Moody