Prime Minister Ehud Olmert is expected to come out forcefully against the German and Italian governments' practice of giving billions of dollars in loan guarantees each year to firms doing business with Iran in talks over the next two days in Berlin and Rome.
The two countries have been involved in international efforts to stop Iran's nuclear program.
Meanwhile, the Prime Minister's Office denied there had been any change in Israel's long-standing policy of nuclear ambiguity, after Olmert appeared to admit that Israel had nuclear capability in an interview with the German television network SAT 1.
Regarding Israel's alleged nuclear capabilities, during his television interview, Olmert became agitated when asked if the fact that Israel possessed nuclear power weakened the West's position against Iran.
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"Israel is a democracy, Israel doesn't threaten any country with anything, never did," he said. "The most that we tried to get for ourselves is to try to live without terror, but we never threaten another nation with annihilation. Iran openly, explicitly and publicly threatens to wipe Israel off the map. Can you say that this is the same level, when they [Iran] are aspiring to have nuclear weapons, as America, France, Israel, Russia?"
Olmert's statements drew fire from politicians across the political spectrum. MK Yuval Steinitz (Likud) responded to Olmert's statement by calling for the prime minister to resign. Meretz-Yahad chairman Yossi Beilin called Olmert's remarks "irresponsible to the point of recklessness."
The Prime Minister's Office said fumbled English was the cause of what it referred to as a misunderstanding regarding what Olmert meant.
Olmert is expected to tell German Chancellor Angela Merkel when they meet in Berlin on Tuesday that with Iran threatening to wipe out Israel and hosting a conference denying the Holocaust, Germany must not let economic interests trump its unique moral responsibility.
Israeli government sources have said that while there was a great deal of public support in Germany for sanctions against Iran, there was a lot of pressure from the business sector to keep this lucrative trade avenue open.
According to Israeli figures, Germany's trade with Iran is in excess of $4 billion a year, while Italy - Iran's largest European trading partner - does some $8 billion worth of trade a year with Iran. Since Iran is considered an unstable country and a risky investment, both Germany and Italy "insure" the investments by guaranteeing them a percentage of their investment, according to government sources.
Olmert arrived in Berlin Monday evening on the first leg of a three-day trip to Berlin and Rome. He is scheduled to take part in a memorial ceremony in Berlin Tuesday morning, followed by a meeting with Merkel and then with German President Horst Kohler. On Wednesday he will travel to Italy for meetings with Italian Prime Minister Romano Prodi, opposition head Silvio Berlusconi, and Pope Benedict XVI and the Vatican's foreign minister.
Syria, along with Iran and the Palestinians, is expected to be a central topic of discussion. Sources close to Olmert clarified en route to Berlin that the prime minister did not believe the Syrians were preparing for war with Israel.
The clarification came a day after senior IDF officials sent contradictory messages regarding the likelihood of war with Syria.
Yossi Baidatz, the head of Military Intelligence's Research Division, told the cabinet that Syrian President Bashar Assad had stepped up production of long-range missiles and moved antiaircraft missiles to the border with Iran. A high-ranking member of the General Staff later painted a different picture, telling reporters that Syria had lowered the level of alert along its border with Israel.
According to officials close to Olmert, the prime minister did not believe there were concrete indications that Syria was preparing for a war with Israel.
Regarding the Palestinian track, which will also feature prominently in Olmert's talks in Germany and Italy, the sources close to the prime minister said that while there were certain positive elements in the Saudi diplomatic initiative from 2000 - such as recognition of Israel and a willingness to solve the conflict through negotiations - it could not replace the road map as the agreed-upon formula to move the process forward.
In the most far-reaching acceptance by a senior minister of the Saudi plan, Defense Minister Amir Peretz said Sunday that "there is a need to relate to the Saudi initiative as a basis for negotiation between us and the Palestinians."
