Israel's incoming Prime Minister Benjamin Netanyahu on Tuesday said that under his government, Israel will continue efforts to reach comprehensive peace with the Palestinians.

"We do not want to rule the Palestinians... I say to the Palestinian leadership that if you really want peace, we can achieve peace," Netanyahu said at a special parliamentary session for swearing in his new government.

"Under the permanent status agreement, the Palestinians will have all the authority necessary to rule themselves," he said, while stressing that the Palestinian National Authority must do its part to "fight terror" if it is serious about peace.

The traditionally hawkish political veteran, who put a brake on the Oslo peace process during his first term as prime minister in late 1990s, said that he would pursue peace on three parallel tracks: an economic one, a security one and a diplomatic one.

Meanwhile, Netanyahu reached out to the whole Arab world, praising the "great and rich" Islamic culture and recalling the historical periods when Arabs and Jews lived together peacefully.

"Israel has always been striving to reach full peace with the entire Arab and Muslim world, and today that yearning is supported by a joint interest of Israel and the Arab states against the fanatical obstacle that threatens us all," he said, alluding to the nuclear capability-pursuing Iran, which he termed as Israel's "greatest danger."

President Shimon Peres, outgoing Prime Minister Ehud Olmert, new opposition leader and Kadima party chairwoman Tzipi Livni and ministers in the new government attended the ceremony.

Speaking respectively before and after Netanyahu, Olmert urged the next government to push forward the Middle East peace process, and Livni stressed that peace process is above all strategic asset.

Jumbo government

Following over five weeks of inter-partisan bargaining, the Likud party chief pieced together a coalition with three other right-wing parties, namely Yisrael Beiteinu, Shas and Jewish Home, and a single left-wing party, Labor, which totally possesses 69 seats in the 120-seat parliament.

The Netanyahu administration, or the 32nd Israeli government, contains 30 ministers and seven deputy ministers, marking one of the largest in the Jewish state's 61-year history. The incoming premier will also serve as financial strategy minister, a supervising ministerial position in the Finance Ministry.

"Israel is facing two immense challenges on the economic and security fronts... I did my utmost to form a unity government at this time of emergency... It is my goal to unite all of the major political forces in the country," said Netanyahu.

The jumbo cabinet is widely seen as a reluctant result of Netanyahu's coalition negotiations, which saw him have to make offers generous enough, including funds and portfolios, in order to draw a party into his camp.

"No system of government has ever forced a leader, if he is indeed a leader and not a politician, to buy his rule with such an outrageous price and use taxpayers' money to pay so much for such little support," said Livni in her first round of fire as opposition leader.

"A big and lavish cabinet is wrong at a time of economic constraints. The public will have to carry the enormous weight of a bloated cabinet," added the outgoing foreign minister, Netanyahu's main rival for premiership in the February 10 election.