Israeli Prime Minister Benjamin Netanyahu, in an impassioned speech to Congress Wednesday, said his country is ready to begin negotiations with the Palestinians on a final settlement.

"Our hand is stretched out in peace for all those who would grab it," he said before an attentive joint meeting of the House and Senate.A hard-liner by reputation, Netanyahu said peace must mean the absence of violence, "walking the streets of your town without the awful shriek of Katyusha rockets."

The prime minister said Israel has no quarrel with any of its Arab neighbors that cannot be settled amicably.

"We reject the thesis of an inevitable clash of civilizations," Netanyahu said referring to Islam.

The Jewish state's conflict is not with another religion "but with those militant fanatics who pervert the tenets of a great faith," he said.

Explaining his approach to Mideast peacemaking, the new Israeli leader broke with his predecessors by insisting that negotiations cannot proceed productively if terrorists continue their attacks on Israel.

Netanyahu said "a peace in which Israel is brought under attack is not a true peace."

Netanyahu also appealed to the Arab countries to put democracy on their agenda. He said every Jew, Muslim and Christian is entitled to the right to express their views, to tolerance and free speech.

But, he said, Israel still could go ahead and make peace with its non-democratic neighbors, while encouraging moves to freedom in the Arab world.

"We don't merely want peace in our time," he said. "We want peace for all time."

At the same time, he urged other nations to join the United States and Israel to prevent Iran and Iraq from gaining nuclear capability. "Time is running out," he said. "We have to act responsibly in a united front."

Turning to Jerusalem, which the Arabs aspire to make the capital of a Palestinian state, Netanyahu talked tough.

"We will not drive out anyone, nor shall we be driven out of any street of our capital," he said.

Israeli forces captured the eastern part of the city in the 1967 war with Jordan, which had held it for 19 years. The city was reunited as Israel's capital, but the United States and most other nations do not recognize it as such.

"There will never be such a redivision of Jerusalem, never," he said to widespread applause.

Netanyahu also drew applause with a declaration that "the era of big government is over" in Israel. ultimately will be a Hebrew translation for "deregulation," he joked.

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The prime minister also promised that Israel will progressively need less assistance from the United States as its wealth grows. That, too, drew applause.

Israel for years has been the largest recipient of U.S. aid, $3 billion a year.

Netanyahu ended with a quotation from a Jewish prayer: "God will give strength to his people. God will bless his people with peace."

On Tuesday, sources said Netanyahu privately assured President Clinton he will move ahead on peace talks with the Palestinians.

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