A day after securing Labor as a coalition partner, Prime Minister-designate Binyamin Netanyahu on Wednesday promised to resume peace talks with the Palestinians after he takes office, saying his government will be a "partner for peace."

The Palestinians welcomed Netanyahu's words, but said his words must be matched by actions.

Speaking at an economic conference in Jerusalem, Netanyahu said his economic development plan for the Palestinians was not a substitute for political negotiations.

"It's a complement to them," he said, calling a strong economy a "strong foundation for peace."

Netanyahu said that peace is a "common and enduring goal for all Israelis and Israeli governments, mine included. This means I will negotiate with the Palestinian Authority for peace."

"I think that the Palestinians should understand that they have in our government a partner for peace, for security, for the rapid development of the Palestinian economy," he added.

Netanyahu also thanked Labor leader Ehud Barak for his proposal to join the Likud-led government, which was approved in a vote at Tuesday's party convention.

"I thank him for doing something for the national good," he said. "We need a strong, stable, national unity government."

Palestinian negotiator Saeb Erekat cautiously welcomed Netanyahu's remarks, but said the new government must commit to establishing a Palestinian state.

"Any Israeli government that accepts the two-state solution, negotiates with us on all core issues without exception, and agrees to stop settlement activity ... will be a partner," he said. "It's time for deeds from both sides as far as their commitments are concerned, not words."

Netanyahu's comments came after US President Barack Obama said peace-making would not get easier with Israel's new leadership, making his first comments on the emerging Israeli government during a press conference Tuesday night.

Asked by the AFP what an Israeli prime minister "who is not fully signed up to a two-state solution and a foreign minister who has been accused of insulting Arabs," referring to Netanyahu and Avigdor Lieberman respectively, does to the peace process, Obama replied, "It's not easier than it was, but I think it's just as necessary."

He added that the composition of the new Israeli government isn't yet clear, nor is the future make-up of the Palestinians, but that regardless, "The status quo is unsustainable."

He continued, "It is critical for us to advance a two-state solution where Israelis and Palestinians can live side by side in their own states with
peace and security."

In a prime-time press conference that focused almost exclusively on the economic crisis, Obama stressed that his tapping George Mitchell as an envoy to the region indicated that "we're going to be serious from day one in trying to move the parties in a direction that acknowledges that reality."

Unprompted by reporters, Obama also defended himself from accusations that his recent overtures to Iran - most notably, a video-taped New Year's
greeting - hadn't succeeded since Teheran had dismissed them.

"Some people said, 'Well, they did not immediately say that we're eliminating nuclear weapons and stop funding terrorism.' Well, we didn't expect that. We expect that we're going to make steady progress on this front," Obama maintained.

He pointed to Iran as one area among many where "persistence" will be key, and suggested it would be a mantra of his administration.

"That whole philosophy of persistence," he said, "is one that I'm going to be emphasizing again and again in the months and years to come as long as
I'm in this office. I'm a big believer in persistence."