German Chancellor Angela Merkel has reportedly nixed a conference in Berlin with Israeli Prime Minister Benjamin Netanyahu because of a bill recently passed by the Knesset which retroactively legalises 4,000 settler Jewish settler homes.

While the annual summit with the Israeli government scheduled for May 10 was officially cancelled because of Germany’s general election in September, an Israeli source connected to the German Foreign Ministry told Haaretz that the real reason for the cancellation is that Berlin is angry at both the ‘Regulation Bill’ and other recent Israeli settlement policy moves.

Last week Israel voted to legalise 250 ‘outpost’ settlements built without government approval on privately owned land in the West Bank.

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Under the new legislation - which the country’s attorney general has warned he will not defend, and could put Israel at risk of breaching international law - Palestinian owners are to be given other land, or compensated financially.

The international community, which views all Israeli construction over the 1967 Green Line as illegal, does not recognise the difference between ‘outpost’ settlements and those authorised by the government.

The controversial new law came into effect almost immediately after Israel announced plans for more than 11,000 new settler homes in the West Bank and annexed East Jerusalem.

It is thought that the bold new moves from Israel’s ruling coalition have been encouraged by the election of US President Donald Trump. The new president has signalled he is far more sympathetic to Israeli interests than predecessor Barack Obama.

Israel: From independence to intifada Show all 7 1 /7 Israel: From independence to intifada Israel: From independence to intifada The proclamation of the state of Israel is read by David Ben-Gurion in Tel Aviv on 14 May 1948 © EPA Israel: From independence to intifada Sixty years on, an illuminated flag is shown in Tel Aviv this week © PA Israel: From independence to intifada Young Jews celebrate the proclamation of the state of Israel in 1948 © AFP/Getty Images Israel: From independence to intifada Palestinian children throw stones at a retreating Israeli tank during an incursion into the West Bank city of Jenin in August 2003 following a suicide bombing in Jerusalem © AP Israel: From independence to intifada How Israel's borders have changed - click image to enlarge © Independent Graphics Israel: From independence to intifada From 1948-50, the world's mostcelebrated war photographer Robert Capa captured extraordinary imagesof Israel's pioneering settlers. Here, Turkish immigrants arrive in Haifa © Robert Capa/Getty Images Robert Capa/Magnum Israel: From independence to intifada The Negba kibbutz, where the walls have been damaged by shells fired during the Israeli-Arab war © Robert Capa/Getty Images Robert Capa/Magnum

Berlin released a statement condemning the new policies, which it said endangered the peace process and signal that Israel is no longer committed to a two-state-solution to the Israeli-Palestinian crisis.

Haaretz’ Israeli source said that the German government had been instructed to “express its dismay at the legislation” both publicly and in diplomatic channels.

German officials approached by the paper did not deny the Regulation Bill was the reason the conference - held to show the closeness between the two countries - was cancelled.