German Chancellor Angela Merkel said on Thursday she wanted next week's G8 summit to send a strong signal to Iran, but also stressed it was important to keep open the possibility of talks on its nuclear programme.

Group of Eight (G8) leaders will meet in L'Aquila, Italy on July 8-10, a month after hardline President Mahmoud Ahmadinejad was re-elected in a vote the opposition has denounced as a fraud. Tehran has cracked down on protesters, jailing many and accusing the West of fomenting unrest.

"I hope the meeting sends a strong message of unity, a united message that the right to demonstrate and human rights cannot be separated and that they apply to Iran," Merkel said in a speech to the Bundestag lower house of parliament.

"I strongly support President (Barack) Obama's offer to Iran of direct talks. We will accompany this in a united way. We cannot drop the issue of a nuclear-armed Iran just because of the current situation. That would be completely wrong."

The West accuses Iran of using a nuclear research programme as a cover for developing nuclear weapons. Iran denies the accusation and says the work is intended for peaceful generation of electrical energy.

After days of mass protests following the elections, security forces used tear gas and batons to disperse demonstrators. Nine Iranian employees at the British embassy in Tehran were taken into custody, although most have since been freed.

"The leadership in Iran must know that if they choose a path of reason, then we want Iran to develop prosperously," Merkel said.

"But if this is not the case, we will not shy away from stating our opinions and showing solidarity with those, including members of the British embassy, that have been put under pressure."