Israel’s prime minister denied reports that Israel has agreed to halt construction in West Bank settlements.

At a news conference in Berlin on Thursday following his meeting with German Chancellor Angela Merkel, Benjamin Netanyahu also said the Palestinians first must recognize Israel’s right to exist as a Jewish state before negotiations could be held.

Merkel said Israel must stop building settlements in the West Bank if there is to be progress in peace talks with Palestinians. The two leaders also discussed Iran. Merkel said that if Iran’s government does not respond to overtures from the West by September and halting its uranium enrichment program, the international community should seriously consider tougher trade sanctions against the Islamic Republic, particularly in energy and finance.

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Netanyahu said the sanctions should “really hurt,” and that if the U.N. Security Council does not act, a “coalition of the willing” should. It’s not clear that U.N. Security Council members Russia and China would support tougher sanctions against Iran. The other three permanent members of the council, Britain, France and the United States, would be likely to do so.

The two leaders also reportedly discussed the case of abducted Israeli soldier Gilad Shalit. Germany has played a key role in mediating efforts to win the release of Shalit, who was taken captive by Hamas in 2006. In an interview Thursday with a German news agency, a senior Hamas leader said the group was waiting for Israel to respond to a possible deal for Shalit, the Jerusalem Post reported.

In his visit to Germany, Netanyahu also met with German President Horst Koehler Foreign Minister Frank-Walter Steinmeier.

Netanyahu’s state visit included a tour of the museum and archive at the House of the Wannssee Conference, the villa where plans were laid out in January 1942 for the extermination of European Jewry.

On behalf of the Yad Vashem Holocaust Memorial in Israel, Netanyahu received a donation of original architectural drawings of the Auschwitz-Birkenau extermination camp, which were found in Berlin last year and purchased by the Axel-Springer media company.

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