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Prime Minister Benjamin Netanyahu said on Tuesday that international "arguing" over Israel's stance on settlements was impeding progress on the Middle East peace progress.

In an interview with Italy's RAI TV, Netanyahu insisted that settlement activity in East Jerusalem and the West Bank must be viewed as separate issues, as Jerusalem is an inseparable part of Israel.

He also said that Israel has been forthcoming with its intentions to halt construction while still allowing for natural growth in existing communities, which he called "an equitable position which reflexes our willingness to enter immediately in peace negotiations and get on with peace."

"I think that the more we spend time arguing about this, the more we waste time instead of moving towards peace," he said.

Netanyahu called his endorsement of a Palestinian state without military capabilities, which he presented in a policy speech at Bar Ilan University earlier this month, a "winning formula for peace."

"If we are asked to recognize a Palestinian state as the nation-state of the Palestinian people, then the very least is that the Palestinians should recognize Israel as the nation-state of the Jewish people," he told RAI TV.

"What does Palestinian self determination have to do with Qassam rockets or with deadly missiles?" he said, with regard to the notion of demilitarization, which invited a slew of criticism following his address. "The answer is nothing. They should have, the Palestinians, all the powers to govern themselves but not the powers to threaten the State of Israel."

"So a demilitarized Palestinian state that recognizes the Jewish State of Israel I think is the winning formula of peace," he said. "I can not understand why anybody who wants peace should reject it."

When asked about the crisis which has erupted in Iran following the contested results of Tehran's presidential election, Netanyahu said he believed "now that the true nature of this regime has been unmasked."

"I think that people now can understand many of the things that we have been talking about all these years," he said. "This is a regime that oppresses its people and this is a regime that threatens everyone with the denial of the Holocaust, the call for the elimination of Israel, with the sponsorship of terrorism throughout the world and with the attempt to develop nuclear weapons, which they can give to terrorists around the world."

He called Iran's nuclear program "an international danger" that "should be dealt with by an international effort led by the United States" and not by Israel alone.

Netanyahu also repeated remarks he made to the German newspaper Bild, in which he declared that peace between Israel and Iran could be possible under a new leadership in Tehran.

"If there will be a change in Iran, this would work in the other direction, and would give peace a tremendous opening, peace between Israel and the Palestinians, peace between Israel and Arab States that share our concerns," he said.

"I think that this is as much a challenge as it is an opportunity. It is as much an opportunity as it is a challenge. I am very hopeful that we can meet the challenge and exploit the opportunity for peace."

Netanyahu's interview took place in Italy, the first stop in his first state visit to Europe during his second term as prime minister.