Foreign Minister Tzipi Livni on Thursday denied rumors Israel would resume peace talks with Syria, saying Syria poses a problem which must be tackled by the region, as Damascus continues to play a dangerous game in the Middle East.

Her comments contrast with Prime Minister Ehud Olmert's recent offers of direct talks if Syrian President Bashar Assad cuts ties to Iran as well as Palestinian and Lebanese Islamist militant groups.

In an interview published Thursday by the French magazine Le Nouvel Observateur, Livni was asked whether she could confirm rumors of a resumption in talks between Israel and Syria, a year after fighting erupted between Israel and Syrian-backed Hezbollah guerrillas in Lebanon.

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"Absolutely not," she said. "Syria is pursuing the dangerous game it plays in the region. It is supporting Hezbollah, refusing the principle of independence for Lebanon and remains a threat," she said, adding that "Moreover, Damascus, which is still the regional centre of support for terrorism, is today associated with Iran in a partnership which also constitutes a danger."

Also Thursday, United Nations special envoy to the Middle East Michael Williams said that Syria has signaled its willingness to change its relationship with Iran, Hezbollah and Hamas if progress were made towards a peace deal with Israel.

Israel has offered direct talks on returning the Golan Heights, captured 40 years ago, if Assad would in return cut his ties to Iran and hostile Palestinian and Lebanese Islamist groups.

But Williams acknowledged deep-rooted suspicions on both sides would make reviving the peace process difficult.

Williams said Syrian officials had made clear to him during his recent visits to Damascus that they believed negotiations that collapsed in 2000 had largely set the parameters for a deal.

"The Syrian side has basically said, 'Look the work is done. It's here in the drawer. The big issues like water, security, access were all looked at then, were pretty much thrashed out. So if negotiations were resumed, then maybe we could make real progress,'" Williams said.

A Syrian Foreign Ministry official recently said Israel and Syria had solved some 85 percent of the problem in past negotiations.

But U.S. President George W. Bush has shown little enthusiasm for an Israeli-Syrian peace track, casting doubt on the chances of progress.

Williams said he believed that Syria's assessment that a deal was "in the drawer" was "somewhat exaggerated".

"It is difficult. There's an awkwardness on both sides which stems from the history of their relationship over 60 years. It's very difficult to remove the suspicions and antipathies that have resulted from that," Williams said.

Negotiations between Syria and Israel collapsed in 2000 without resolving the fate of the Golan, occupied by Israel in 1967 during the Six Day War and annexed in 1981.

Williams said he briefed Prime Minister Ehud Olmert last month on his talks in Damascus.

Williams said he believed Israel was genuinely interested in "testing the waters" for a resumption of talks, and that he was using his role as a go-between to try to "clarify for each what I perceived to be the other's view".

"I think both sides find it quiet difficult in making an assessment of each other," Williams said.

Olmert has said he is willing to hold direct talks with Damascus provided it is willing to sever ties with Iran and the militant groups Hezbollah in Lebanon and Hamas in the Palestinian territories.

Asked if Syria had shown a willingness to sever those relations, Williams said, "The impression I got from my visit to Damascus was that if there was progress in terms of establishing a peace track, then we would see some changes in Syrian behavior on the three issues, Iran, Hezbollah and Hamas."

Williams did not offer specifics about how those signals were conveyed and how seriously he took them.

Muhammad Muslih, a university professor who is an expert on Syrian affairs, said last month Damascus would resist any pressure to cut links with Iran and the militant groups Hezbollah and Hamas as a precondition of talks.

But he predicted that, if Israel made concessions in peace talks, Syria would be "more than willing" to change the nature of its relationship with Iran.

In a television interview this week, Olmert urged Assad to begin direct peace negotiations between the two countries, and advised him not to wait for American engagement.