A crisis erupted between Prime Minister Benjamin Netanyahu and German Chancellor Angela Merkel. During a telephone call this week, Merkel told Netanyahu that he had disappointed her and had done nothing to advance peace, sources told Haaretz.

The prime minister tried to persuade Merkel that he was about to launch a diplomatic initiative, explaining he is making a speech in two weeks in which he will outline a new peace plan.

Open gallery view German Chancellor Angela Merkel, left, with Prime Minister Benjamin Netanyahu, during a joint cabinet meeting in Jerusalem, Monday, Jan. 31, 2011. Credit: AP

A senior German source said Netanyahu had called Merkel on Monday, following the American veto in the UN Security Council last Friday and Germany's vote in favor of the Palestinian proposal to condemn construction in West Bank settlements.

The conversation between the two leaders was extremely tense and included mutual accusations and harsh statements, the official said.

Netanyahu told Merkel he was disappointed by Germany's vote and by Merkel's refusal to accept Israel's requests before the vote, the source added. Merkel was furious.

"How dare you," she said, according to the official. "You are the one who disappointed us. You haven't made a single step to advance peace."

The prime minister assured Merkel that he intended to launch a new peace plan that would be a continuation of his Bar-Ilan University speech, given in June 2009, in which he agreed to establishing a Palestinian state, the official revealed.

"I intend to make a new speech about the peace process in two to three weeks," Netanyahu told Merkel.

The German chancellor and her advisers, who have been repeatedly disappointed by Netanyahu's inaccurate statements and failure to keep promises, did not believe a word of what the prime minister told her, the source said.

Merkel decided to check with Israeli and U.S. officials to determine whether Netanyahu was serious this time around, or was merely trying to buy more time and alleviate the international pressure on him.

Haaretz's check with a number of Israeli sources indicates that the prime minister and his advisers are desperately looking for a way to jumpstart the peace process, in view of Israel's growing international isolation. "Netanyahu has recently begun talking about a second Bar-Ilan speech," said a senior Foreign Ministry official close to Foreign Minister Avigdor Lieberman.

A non-government source told Haaretz that Netanyahu and his advisers are working on a speech that would outline an alternative to the interim agreement with the Palestinians, similar to Lieberman's plan. That initiative, which Haaretz reported on a month ago, consists of establishing a Palestinian state within temporary borders on about 50 percent of the West Bank.

The prime minister has been discussing the plan with Lieberman in recent weeks to understand it more thoroughly.

All of the sources, however, added that it was unclear whether Netanyahu seriously intended to advance the peace process or whether he merely wants to appear to be doing so, as a means of shifting international pressure onto the PA. In the latter case, he is counting on the Palestinians' objection to the Israeli initiative.

A source in the prime minister's office confirmed that Netanyahu told Merkel of his intention to outline his plans in a speech, but not in the next few weeks. The speech would be made only in the context of resuming the peace talks with the PA, the source revealed.

Merkel ended her visit in Israel three weeks ago deeply disappointed, a German official said. While here, she told Netanyahu the situation in the Middle East, in view of the revolution in Egypt, made it necessary for Israel to create a peace initiative.