Defense Minister Ehud Barak on Tuesday said that Israel's failure to strike a peace deal with the Palestinians was a greater threat to the country than a nuclear Iran, Army Radio reported.

"The lack of a solution to the problem of border demarcation within the historic Land of Israel - and not an Iranian bomb - is the most serious threat to Israel's future," Barak told a Tel Aviv conference.

Barak called on the Palestinian President, Mahmoud Abbas, to return to the negotiating table. Abbas has so far refused to restart talks until Israel freezes settlement building in the West bank, including in east Jerusalem.

Abbas recently complained to Saudi King Abdullah over heavy pressure on him, particularly from Egyptian President Hosni Mubarak, to renew talks with Israel, the London-based Arabic newspaper Al-Quds Al-Arabi reported on Tuesday.

Mubarak told Abbas that Egypt would "wash its hands" of the Palestinian issue unless the Palestinians backed down from demands for a total freeze, the newspaper said.

Palestinian media reported on Monday that Abbas has continued to insist on a complete freeze but may accept a new proposal by U.S. envoy George Mitchell that would build trust between Israel and the Palestinians and improve the quality of life for Palestinians in the West Bank.