"Surely, nobody expects [Prime Minister Binyamin] Netanyahu to offer more than what [former prime minister Ehud] Olmert offered [to Palestinian Authority President Mahmoud Abbas]," Intelligence Affairs Minister Dan Meridor [Likud] told German magazine Der Spiegel in an interview published Tuesday.

Meridor was speaking with the magazine ahead of Netanyahu's visit to Berlin, one of the stops on his European trip this week. In the interview, Meridor detailed the Israeli government's readiness to resume negotiations with the Palestinians, announced by Netanyahu in Sunday's cabinet meeting before of his departure.

Meridor rejected the interviewer's characterization of the current Israeli administration as "hard-line," and pointed out that Abbas currently refuses to negotiate until Israel completely freezes settlement activity, despite the fact that he negotiated with Olmert for three years during the reign of former US president George W. Bush, when Israel's settlement policy was, Meridor said, identical to Netanyahu's.

He also assessed that Abbas's current position was affected by internal issues. "Perhaps [Abbas] reacted the way he did because he doesn't control Gaza, where 40 percent of the territories' population lives and into which he cannot even travel. Perhaps [he] wants even more than just the Palestinian state; but there is nothing more to give," Meridor said.

When confronted with speeches made last week by Strategic Affairs Minister Moshe Ya'alon, who on a recent tour of the West Bank expressed support for the settlers, Meridor countered: "Ours is a big coalition government with diverging views. What you describe is neither the official policy of Prime Minister Netanyahu nor the official policy of the government."

"We haven't built any new settlements, so we are fulfilling the understanding [we've reached with the previous US administration]. Now there are some ongoing discussions about a compromise," Meridor clarified.

Seemingly drawing a line in the sand, Meridor said, "The Old City with the Jewish Quarter and the Wailing Wall will never be part of an Arab state; all the major Israeli parties share this conviction. There could be a compromise on land in Judea and Samaria. But all Israeli governments have agreed on having a united Jerusalem. This is our clear position, but we can negotiate about Jerusalem. There are no preconditions."

"Final borders," the minister added, "are open for discussion. But we will not return to the line of 1967 - that's for sure."

Meridor expressed optimism about the resumption of Israeli-Palestinian negotiations, saying, "All in all, I am quite optimistic that things in the Middle East will develop in a positive way. There's something in the air."

However, he noted that the introduction of religion into a conflict that was historically defined on nationalistic ideas complicated matters.

"It has become more difficult over the years because of the introduction of religion into this conflict. Arab rulers hated us in the past, but they did so because of nationalistic ideas. Since the [1979] revolution in Teheran, we hear a different tune: The Iranians, Hizbullah and Hamas fight us in the name of religion. This is very bad because people can compromise, but gods never compromise."

But Meridor also insisted that the issue of Jerusalem was not predicated on religion. "The previous pope (John Paul II) said that Jerusalem is sacred to all religions, but was promised to one people. We have no religious claim on Jerusalem; we have a national one. Jerusalem is our capital," he said.

Meridor said that people who believe that both the Palestinians and the Israelis had made peace with the status quo and were not prepared for any more painful compromises were mistaken. "For us, the status quo is a bad option. We need to change it - and take risks," he said, adding that "we must take into account the lessons we've learned from the past."

Moving on to the issue of Iran's nuclear pursuit, Meridor, whose dossier as intelligence affairs minister centers on the Iranian issue, refused to divulge Israel's plans should the international effort to stymie Iran's ambitions fail.

"I don't think the prime minister has made up his mind [whether to attack Iran's nuclear installations militarily]," he said, "but I don't want to get into details..."

"I think Iran shouldn't be allowed to become a nuclear power. This is not only an issue for Israel but for the whole world. It would be a victory for the extremists over the moderates in the Arab world. This worries the moderate Arab countries more than anything else. It would change the equilibrium in the Middle East; it would mean the end of the [Nuclear] Non-Proliferation Treaty; it would be a serious threat for us.

"One shouldn't forget that Iranian President [Mahmoud] Ahmadinejad has repeatedly spoken about the illegitimacy of Israel, and its destruction. But we should concentrate now on harsher sanctions against Teheran, with America leading the way. And we are counting on the Europeans to follow with serious actions. This includes Germany, which is one of Iran's very important trading partners," the minister said.

Asked whether Israel would attack Iran on its own or ask for US consent, he said "I don't want to go into this. But we all see the clock ticking - and Netanyahu knows what he's doing."