Berlin - Israeli Prime Minister Benjamin Netanyahu is to meet German Chancellor Angela Merkel on Thursday for talks on efforts to reach peace in the Middle East.

The Israeli premier met with German head of state Horst Koehler on Wednesday, after talks with US envoy George Mitchell in London in which Netanyahu reported "progress" toward a resumption of peace talks with the Palestinians.

The central questions on Netanyahu's agenda are garnering European support for a tougher stance against Iran and reaching a deal on controversial Israeli settlement construction in the West Bank, the cessation of which is a key Palestinian precondition for going back to the negotiating table.

Netanyahu is due to meet German Foreign Minister Frank-Walter Steinmeier in the morning before being greeted by Merkel in the chancellery in the afternoon.

Merkel preceded the visit by calling for a greater readiness for compromise on Netanyahu's part, in an interview with German television.

Merkel told the N24 broadcaster on Wednesday that "we shouldn't let the window of opportunity pass," and renewed calls for the so- called two-state solution to be implemented.

"The time is absolutely right. Let us do everything to use it," Merkel said.

Israeli-Palestinian peace talks were suspended late last year as Israel began an election campaign. They have not yet resumed.

Speculation has risen in recent days that Israel and the Obama administration, which has demanded that Israel stop all settlement construction, are close to reaching a deal.

Media reports have said that the Israelis are prepared to offer a temporary construction freeze of state-funded settlements in the West Bank for up to one year.

The price for the concession, according to reports by the Guardian newspaper on Wednesday, would be much tougher European and US sanctions on Iran, which Israel considers to be an existential threat.

On Wednesday evening Netanyahu made positive signals when he said that he would be prepared to meet with Palestinian President Mahmoud Abbas, even outside the frame of resumed peace talks.

In addition to the substantive talks in Berlin, the Israeli premier is to receive original plans for the construction of the Auschwitz concentration camp as a gift from the Bild newspaper, which will be displayed in the Yad Vashem Holocaust memorial in Jerusalem.

Netanyahu is also due to visit the site of the 1942 Wannsee Conference, where senior Nazi officials began implementing their plans for what became the Holocaust.(dpa)