(Reuters) - A key rival of Israeli Prime Minister Benjamin Netanyahu criticized his hawkish stance on Iran´s nuclear program on Saturday, making the issue a central theme for parliamentary elections expected this year.

"It´s a most serious mistake to turn the issue of defense against Iran into Israel´s biggest problem," Shelly Yechimovitch, leader of the left-of-centre Labour party, said in a televised interview.

She called Iran´s atomic program a "problem of the entire world," adding that "the fact we take it upon ourselves to be the spearhead is an error," in the interview on Channel 2 television.

Yechimovitch backs Washington´s position that there is still time to see if economic sanctions and diplomacy can stop Iran seeking nuclear weapons, before deciding any military steps.

Netanyahu has rated the chances of the latest round of talks with Tehran as low and thinks sanctions are not strong enough and may be providing Iran with enough time to enter a "zone of immunity" after which it may be impossible to stop its nuclear program.

Israel, reputed to have the region´s sole atomic arsenal, has long said it would strike Iran to prevent it from getting nuclear weapons which it sees as a threat to the existence of the Jewish state. Iran says its nuclear program is peaceful.

Some former Israeli security chiefs have also criticized Netanyahu´s hawkish stance. His former internal security chief, Yuval Diskin, accused both him and Defence Minister Ehud Barak of having a "messianic" policy toward Iran.

POTENTIAL PARTNER

Opinion polls show Labour, which ruled Israel for decades but now holds only eight seats in parliament, bouncing back to second place behind Netanyahu´s right-wing Likud.

With Labour seen winning up to 18 seats, and Likud about 30 in the 120-member parliament, Yechimovitch could be a potential partner in Netanyahu´s next governing coalition.

Yechimovitch said she would not rule out joining a future Netanyahu- led government if she could not topple him, provided his coalition were to embrace a "social democratic agenda" and more diplomacy with Arab nations.

Israel should take steps to renew peace talks with Palestinians, frozen since late 2010, she said.

A socialist-minded former journalist elected party leader in September, Yechimovitch had focused her criticism of Netanyahu on economic policies blamed for housing shortages and rising food prices that fuelled unprecedented protests last year.

Yechimovitch said it was "critical" to improve ties with neighboring Egypt, strained since an uprising overthrew President Hosni Mubarak last year, and also with Turkey with whom ties soured after a lethal military raid on a boat carrying pro-Palestinian activists trying to breech a naval blockade of Gaza.

The election is due in 2013 but Netanyahu´s political allies have tabled a motion to hold it in September as disputes over budget cuts and military call-up exemptions for Orthodox Jews threaten to tear apart the ruling coalition.

(Editing by Robin Pomeroy) (© Thomson Reuters 2012. 05/05/12)