STEVE WEIZMAN, JERUSALEM French President Nicolas Sarkozy told Israel yesterday there could be no Middle East peace unless it dropped its refusal to cede sovereignty over parts of Jerusalem claimed by the Palestinians.

STEVE WEIZMAN, JERUSALEM

French President Nicolas Sarkozy told Israel yesterday there could be no Middle East peace unless it dropped its refusal to cede sovereignty over parts of Jerusalem claimed by the Palestinians.

Speaking to a packed session of parliament during his three-day state visit, Sarkozy called on Israel to stop settlement in the West Bank.

However, he tempered his address by assuring Israel it could count on France's support in halting Iran's nuclear programme.

"There cannot be peace without an immediate and complete halt to settlement," he said of the faltering Middle East peace process. "There cannot be peace without recognition of Jerusalem as the capital of two states and the guarantee of free access to the holy places for all religions."

Israel and the Palestinians have set a year-end target to reach a final peace deal, but both say that is increasingly unlikely. The Palestinians are upset about Israeli construction in the West Bank and east Jerusalem, areas they claim for a future state. Israel says the Palestinians must do more to rein in militants.

Sarkozy assured Israel it was not alone in its concerns about Iran's "nuclear military programme" and said confronting Tehran required a united international front. France takes on EU presidency on July 1.

"France is determined to pursue, with its partners, a policy of progressively tougher sanctions," he said. "An Iran equipped with nuclear weapons is unacceptable for my country."

EU nations yesterday approved new sanctions against Iran, including a freeze on assets of the country's biggest bank and a travel ban on high-level experts dealing with Iran's nuclear programme.

Israel, which believes Iran is developing nuclear weapons, has welcomed the international sanctions, but warned that "all options are on the table" if diplomacy fails.-AP