Prime Minister Benjamin Netanyahu said Monday that Israel would be prepared to compromise and "cede parts of our homeland" for true peace with the Palestinians, but added that he did not believe the latter was ready to be a true partner for peace.

A Palestinian government that comprises representatives of Hamas, a movement that refuses to recognize Israel's right to exist, is not a government with which it would be possible to make peace, said Netanyahu.

Open gallery view Prime Minister Benjamin Netanyahu addresses Knesset, on May 16, 2011. Credit: Emil Salman

Addressing the Knesset a day after an unprecedented wave of demonstrations marking Nakba Day, on which Palestinians annually protest the creation of the state of Israel, Netanyahu said Israel must stop blaming itself for the conflict and start looking at the "reality" of the situation with "open eyes".

The root of conflict was not the absence of a Palestinian state, said Netanyahu, but Palestinian opposition to the creation of the State of Israel.

"This is not a conflict about 1967 but about 1948, when the state of Israel was established," said Netanyahu. "The Palestinians call this a day of catastrophe, but their catastrophe is that their leadership has not succeeded in reaching a compromise. Still today, they don't have a leadership that is ready to recognize Israel as a Jewish state."

"We cannot bury our heads in the sand," Netanyahu said. "We must look at this reality with open eyes. We must call this child by its name – the reason there is no peace is because the Palestinians refuse to recognize Israel as the national state of the Jewish people."

A Palestinian state should be created only through a peace agreement, Netanyahu said, adding that Israel could not make peace with an entity intent on its destruction.

"I know that a vast majority of the nation understands that it is possible to make peace only with someone who wants to make peace," said Netanyahu. "Someone who wants to destroy us is not interested in peace."

"The Palestinian government, of which half declares daily that it is intent on destroying Israel, is not a partner for peace," added said Netanyahu, referring to the recent reconciliation between rival Palestinian factions Fatah and Hamas and the imminent formation of a unity government. "They need to end the conflict, not continue it."

Netanyahu said he believed that most Israeli people would stand behind a foreign policy based on the following conditions:

The demand that Palestinians recognize Israel as the national homeland of the Jewish people; a commitment to end the conflict; a solution to the Palestinian refugee issue that did not require absorption within Israel's borders; the establishment of a Palestinian state only in accordance with a peace deal that did not infringe on Israel's security; that said Palestinian state be demilitarized; the preservation of large settlement blocs within the West Bank; and the insistence that Jerusalem remain the undivided capital of Israel.

But Netanyahu also appeared to hold out the prospect of future territorial compromise if his peace terms - which have drawn Palestinian rejection in the past - are met.

"These compromises, by the way, are painful because it means, in any event, tracts of our homeland. This is not a strange land, it is the land of our fathers and we have historical rights and not only security interests," he said.

