German Chancellor Angela Merkel decided to cancel a joint summit with Israel's government, scheduled for May 10 in Jerusalem. The official reason her office gave the Prime Minister's Office for the cancelation in the planned visit by Merkel and top officials was the German elections in September. But German and Israeli sources say there was another reason, albeit not the main one – her dissatisfaction at the Israel's new law to expropriate private Palestinian lands, enacted in Knesset last week.

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An Israeli source who was in contact with the German Foreign Ministry and the chancellor's office last week reported hearing massive anger over the law. The Israeli source, who asked to remain anonymous due to the sensitivity of the issue, said he had heard from German officials that in response to the law's enactment, the German government had launched a number of initiatives, both publically and in diplomatic channels, to express its dismay at the legislation.

According to the source, one of those responses had to do with the Netanyahu-Merkel summit. Merkel's initiated the summit between the German and Israeli government during Ehud Olmert's term as prime minister. Since then they have been held almost annually, alternating between Berlin and Jerusalem, and including a meeting between the two premiers and between the ministers of the two governments, as well as a joint cabinet session. The purpose of the summits is to highlight the close relations between the two countries.

A few days before the Knesset passed the so-called "Regularization Law," the chancellor's office confirmed the date for the Jerusalem summit for May 10 and 11. But only a few days after the law passed, Merkel's national security adviser, Kristof Heusgen, contacted Netanyahu's office again and informed them that the chancellor had decided to postpone the summit, due to preparations for the elections in Germany.

However, the elections in Germany are scheduled for September 24, four and a half months after the original date for the summit. What the cancelation means that in an unusual occurrence, there will be no joint Israeli-German government summit this year. The Israeli source said he had heard from German officials that despite the election excuse, the real reason for the cancelation is the new law and Israel's decision to build 6,000 housing units in the settlements.

Germany's ambassador to Israel refused to respond to Haaretz's request for comment. Two senior German officials also refused to comment, but did not deny that the background for the cancelation was Berlin's dissatisfaction over the expropriation law.

"The governments' summit will most likely not take place in May," a third senior German official said. "Regarding the elections – they are only in September."

However that was not the last of Germany's response to the expropriation law. In a rare move, the German Foreign Ministry decided to invite Israel's envoy to Germany, Yakov Hadas-Handelsman, for clarifications on the law. The invitation was unusual not just because it took place, but because of the high rank of the German officials involved in it – state secretary – as well as the strongly worded messages voiced to the Israeli ambassador.

In addition, Germany also published a strong public statement only days after the law passed, with its Foreign Ministry saying the German government no longer believed Israel is committed to the two-state solution.

"Our trust in the Israeli government's commitment to the two-state solution has been fundamentally shaken," Germany said in the statement. "We hope and look forward to the Israeli government renewing its commitment for the two-state solution to be reached through negotiations, and prove it by actual steps in accordance with the Middle East Quartet's demand," it said.

"After the puzzling remarks by several cabinet ministers who have publicly called for the annexation of parts of the West Bank, and are preparing bills for that purpose, this is now a question of credibility," it said.

Officials in Jerusalem deny receiving any indication from the Germans that the cause of the summit's cancelation was the expropriation law. A senior Israeli official said last week that only a day after the law passed, Kristof Heusgen, Merkel's national security adviser, called his Israeli counterpart, Jacob Nagel, the acting head of Israel's National Security Council, to request information on the new legislation.

The official noted that Heusgen did not voice any discontent regarding the law, but was only interested in understanding its ramifications. According to the official, Nagel explained the issue and even passed on to Merkel's aide a document outlining the law's key points. The official also noted that a few days later, Heusgen called again and announced that Merkel wants to postpone the summit because of the election campaign. "The issue of the law was never brought up during the second call," the official said.

The spokesman for Israel's Foreign Ministry, Emmanuel Nahshon, also said that the request to delay the summit came from the Germans due to scheduling constrains arising from the September elections.