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An attacker, who was on a police watchlist for contacts with Islamist extremists, launched a suspected terror attack in Belgium's city of Liege on Tuesday, shooting dead two female police officers with their own weapons before killing a bystander.

Amateur footage shows the suspect shouting "Allahu Akbar" ("God is greatest") as he walked through the streets during the rampage. Another video shows a short, intense burst of gunfire, after which the suspect drops to the ground.

Prosecutor, Philippe Dulieu, told a news conference, "Armed with a knife, the suspect followed and attacked two police officers, and used their own firearms to kill them.

"He continued on foot, attacking a parked vehicle where he opened fire on a 22-year-old man in the passenger seat. The young man died.

"He then continued and entered the Leonie de Waha school. He took a woman working there as hostage. Police intervened, he came out firing on the police officers, wounding several before he was killed."

A source close to the investigation named the attacker as 36-year-old Benjamin Herman, saying he had past convictions for robbery, violence and drug dealing and was on a special police watchlist because of his contacts with radical Islamists.

It is reported that Herman was released from prison on Monday.

"Herman was 'already on the run' after committing another murder on Monday night in the town of On, in southern Belgium", the source told AFP on condition of anonymity, although local prosecutors say they have not yet established a link between the two incidents.

The source also said, "He is suspected of having been radicalised (in prison)... He has been reported or presumed to be belonging to the entourage of an Islamist recruiter".

Liege police chief Christian Beaupere said it was "clear that the assassin's objective was to attack the police", adding that "One of the four officers wounded in the attack had suffered a serious leg injury".

Prime Minister, Charles Michel, denounced Tuesday's attack, calling it "cowardly and blind violence".

He tweeted, "All our support for the victims and their loved ones. We are following the situation with the security services and the crisis centre".

Other European countries vocalised their support. French President, Emmanuel Macron, condemned the incident as a "terrible attack", expressing the "solidarity of the French people", while British Prime Minister, Theresa May, said the UK "stands resolute with our Belgian allies against terror".

Police cordoned off the area as panicked parents collected their children from the school. Liege provincial governor confirmed there were no injuries to the staff or pupils.

Julie Fernandez, an MP and mother of a seven-year-old at the school, told AFP, "All the children are fine, those of the primary and kindergarten saw nothing, they were evacuated through the back of the school.

"They were cared for by staff and psychologists and high school students were cared for in a nearby park."

Belgium remains on high alert and federal prosecutors say they have launched a terror investigation into the incident.

Take a look at the footage below.

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