Benjamin Netanyahu was sworn in as Israeli prime minister on Tuesday, pledging to seek peace with the Palestinians amid international concern his largely right-wing cabinet could bury negotiations.

Parliament approved by a 69-45 vote Netanyahu's coalition, which includes his right-wing Likud, the ultra-nationalist Yisrael Beitenu, ultra-Orthodox Shas and a small religious faction as well as the centre-left Labour party.

Netanyahu (59) was then sworn in, followed by the 29 other ministers in his cabinet, the largest in Israel's 61-year history.

In his address to the Knesset, the 120-seat parliament, Netanyahu told MPs the biggest threat Israel faced was the possibility of "a radical regime armed with nuclear weapons" ? a clear reference to arch-foe Iran.

Peace is possible

But the hawkish Likud leader said peace with the Palestinians was possible, while making no mention of a future Palestinian state.

"I am telling the leaders of the Palestinian Authority ? if you really want peace, it is possible to reach peace," he said. "We will carry out peace negotiations with the Palestinian Authority with a view to reaching a final accord.

"Under the final accord, the Palestinians will have all the rights to govern themselves except those that can put in danger the security and existence of the State of Israel," Netanyahu said.

But he added that Palestinians "must fight against terrorism" if they want peace.

The Palestinian Authority said Netanyahu's statements "mark a start that is not encouraging".

"The American administration should pressure the Netanyahu government to stick to the fundamentals of the peace process, in other words land for peace.

"This means the restitution of all the Palestinian territories occupied in 1967, including east Jerusalem," said Palestinian President Mahmud Abbas's spokesperson.

Focus on Iran

Since being charged with forming a government after the 10 February general election, Netanyahu has repeatedly made clear that his priority was dealing with arch-foe Iran, rather than moving the hobbled peace talks forward.

"It is shameful that decades after the Holocaust, calls by Iranian leaders to destroy Israel are greeted with indifference by the world," he told MPs.

"The Jewish people have learned the lesson; they cannot lower their heads before dictators who threaten to destroy them.

"Contrary to what happened during the last century, today we have the means to defend ourselves. We know how to defend ourselves."

Israel's Peace Now anti-settlement watchdog has called the new cabinet "one of the most right-wing governments ever known in Israel."

The new foreign minister is Avigdor Lieberman, a firebrand ex-bouncer and immigrant from the former Soviet republic of Moldova who has been branded a "racist" by critics for his anti-Arab diatribes.

With Netanyahu, who opposes the creation of a Palestinian state, and Lieberman, the international community has expressed alarm over the future of the already uncertain peace process with the Palestinians that was relaunched in November 2007.

EU warns of 'consequences'

The European Union last week warned of "consequences" if the new government does not commit itself to the principle of the two-state solution, saying relations would become "very difficult."

And US President Barack Obama acknowledged that peace efforts under a Netanyahu cabinet were not getting any easier but were just as necessary.

One of the main issues is Netanyahu's opposition to the creation of a Palestinian state, a principle to which Israel committed itself under the 2003 international roadmap for peace.

Netanyahu, who put the brakes on the Oslo autonomy accords during his first term as premier in 1996-1999, says economic conditions should be improved in the occupied West Bank before negotiations take place on other issues.

But keen not to antagonise key ally Washington where Obama has vowed to vigorously pursue the peace talks, the new Israeli leader has said he will continue the negotiations with the Palestinians.

Despite his hardline rhetoric, Netanyahu signed several deals with the Palestinians under US pressure during his first term as premier, and some analysts in Israel say he would do so again if pressed by Washington.