Germany is ready to pursue further economic sanctions on Iran, Chancellor Angela Merkel said in a joint press conference with Prime Minister Benjamin on Monday.
"We have made it clear that if the reaction of Iran does not change, we will cooperate in the preparation of wide-ranging sanctions ... preferably within the framework of a UN Security Council resolution," she said.
Merkel, who advocated the immediate implication of "crippling sanctions" on Tehran, was speaking during a historic joint meeting of the two countries' cabinets in the German capital.
Netanyahu also commented on Iran's refusal to dismantle its contentious nuclear program, saying that "a regime that oppresses its people ... cannot be allowed to have nuclear weapons."
Merkel said that in coming weeks her government would consult with other nations prepared to push for sanctions against Tehran.
"We have repeatedly made the offer to Iran for a transparent cooperation. Unfortunately they have not taken it," she said.
Netanyahu had been accompanied to the joint cabinet session earlier Monday- only the second ever to take place, and the first on German soil - by Foreign Minister Avigdor Lieberman and Defense Minister Ehud Barak.
In total around ten ministers from each government are expected to take part in the talks.
"The joint government consultations are a very special event. Germany only conducts such meetings with a very few partners," government spokesman Christoph Steegmans said ahead of the Merkel- Netanyahu meeting.
Prior to the noontime meeting, Netanyahu held talks with Merkel and took a tour of a memorial situated near the Brandenburg Gate in honor of European Jewry murdered during the Holocaust. The prime minister was also expected to visit the Jewish Museum in Berlin and to meet with the speaker of the Bundestag during his visit.
The two sides are expected to discuss security issues - including the potential for further sanctions on Iran - as well as development projects and environmental topics, the spokesman said.
"The prime minister and Chancellor Merkel will of course hold a series of meetings relating to our region, to the peace process, and to the gorilla always in the room, the Iranian matter of course," Israel's Ambassador to Germany Yoram Ben Zeev, told Israel Radio 9 on Monday.
High on the agenda at the meeting will also be Israeli plans to buy a German-built Dolphin class submarine, as well as two missile boats, at a total cost of around a billion euros. The last decade has seen Germany become the main supplier of equipment to the Israeli navy, which already operates three German Dolphins.
Foreign analysts say the submarine is capable of launching ballistic missiles carrying nuclear warheads. (Israel operates a policy of 'nuclear ambiguity' but is widely believed to have atomic weapons.)
Two of the crafts are now under construction in Germany and are expected to be sold to Israel in the coming years. Over the past months the two allies have also held talks over the sale to Israel of a sixth Dolphin, as well as two 'stealth' missile boats.
Both Israel's Chief of Staff, Gabi Ashkenazi, and the Defense Ministry Director General, Pinhas Buchris, have visited Germany in the past three months to discuss weapons sales.
Germany and Israel established diplomatic ties in 1965, 20 years after the end of the Holocaust, in which six million Jews were deliberately murdered by the Nazi regime.
"I think that Germany today, without much effort, can be considered the country closest to Israel in Europe, and maybe in general," he added.
Foreign Minister Avigdor Lieberman was received by his German counterpart, Guido Westerwelle, at Germany's foreign ministry.
The joint cabinet meeting had been originally scheduled for November, but had been postponed at the last minute when Netanyahu fell ill.
The first German-Israeli cabinet meeting was held in Jerusalem in March 2008, when Merkel traveled to Israel at the head of a ministerial visit and addressed the Knesset.
Netanyahu had been scheduled to travel to Berlin in late November, but the trip was canceled due to illness.