German Chancellor Angela Merkel said she and Israeli Prime Minister Benjamin Netanyahu "agreed to disagree" on a plan to build 3,000 apartments in a controversial area near Jerusalem.
Merkel and Netanyahu held a joint news conference Thursday following a meeting between the two leaders.
"Israel decides for itself, it is a sovereign state. All we can do as a partner is give our opinion and our evaluation. The aim is clear, it is for a two-state solution," Merkel told a reporter, referring to the announcement made last week by Israel after the United Nations General Assembly approved enhanced observer statehood status for the Palestinians.
Germany abstained in the Nov. 29 vote in the General Assembly.
Netanyahu said he was willing to restart negotiations with the Palestinians.
"Israel remains fully committed to achieving a peace with the Palestinians based on the principle of two states for two peoples, and in this peace, a demilitarized Palestinian state recognizes the Jewish State of Israel," he said. "I believe that the only way to achieve such a peace is through direct negotiations between Israel and the Palestinians. I hope that the Palestinians will return to the negotiating table, that they do so without preconditions so that we can work together to forge a secure and lasting peace that address the needs of both Israelis and Palestinians alike."
Netanyahu said he thanked Merkel for Germany's staunch support of Israel during the recent operation in Gaza. The strong international support for Israel during the conflict "made a difference," he said.
The Israeli leader and members of his Cabinet were in Germany for a joint meeting of the two countries' governments. Netanyahu said the meeting opened up "area after area for German-Israeli cooperation, and for that and for everything else, I want to thank you, Chancellor Merkel. Thank you."
Israeli Foreign Minister Avigdor Liberman pulled out of the meeting at the last minute, reportedly in order to ease tension with his deputy foreign minister, Danny Ayalon, after not including Avalon on his Yisrael Beiteinu Knesset list.