For the first time in the history of German-Israeli relations, government ministers from both nations took part in joint consultations on Monday, March 17 in Jerusalem during a highly symbolic visit by Chancellor Angela Merkel to the Jewish state.

"This is an extraordinary, in many ways a historic occasion in relations between Israel and Germany," Israeli Prime Minister Ehud Olmert said.

Israel becomes the sixth country -- after France, Italy, Spain, Poland and Russia -- with which Germany will in future hold yearly intergovernmental meetings.

The two countries plan to step up bilateral cooperation in culture, science, economics and media. There are plans to set up a German-Israeli forum to promote exchanges of young people from both nations. The Israeli universities of Haifa and Jerusalem plan to set up centers for Germany studies this year and the two countries' armies intend to scale up training exchanges.

"A new chapter"

Earlier, a sombre-faced Merkel turned up the eternal flame in the Hall of Remembrance at the Yad Vashem memorial before laying a wreath and pausing for several seconds of silence.

Dressed in a black suit, Merkel -- the first German chancellor born after World War II -- also visited the Children's Memorial and signed the guestbook at the end of her third visit to Yad Vashem since taking office.

"In view of Germany's responsibility for the Shoah (Holocaust), the German government... underlines its determination to build a future together," she said.

On Sunday, Merkel visited the grave and home of Israel's founder and first prime minister David Ben Gurion at the Sde Boker kibbutz in the heart of the Negev desert in the south of the country. On Tuesday, Merkel will become the first German chancellor to address the Israeli parliament, the Knesset, an honour normally reserved for heads of state.

"Sixty years after the creation of Israel we affirm again the special responsibility of Germany towards Israel," Merkel said at a lavish welcoming ceremony at Tel Aviv's Ben Gurion airport. "But there is not only the responsibility for the past but projects for a better future," she added. "I am grateful we can open a new chapter in relations between our two countries," she said.

Welcoming Merkel, Olmert praised her "unflinching support" for the Jewish state and described the German leader as a "strategic ally."

On the eve of her three-day visit, Merkel stressed Germany's continuing responsibility to Israel.

Merkel said she wanted "to show our responsibility for the past -- the horrors of the Shoah -- and demonstrate clearly that Israel's right to existence is a constant in German foreign policy."

More than 60 years since the Holocaust, in which the Nazis killed six million Jews, Germany is Israel's most important political and trading partner in Europe.

Merkel holds back with criticism

Merkel, who is under pressure from some politicians at home to raise controversial issues with Olmert such as the building of Jewish settlements in the West Bank, remained cautious about the topic during talks with the Israeli prime minister.

Pointing out that actions by both the Israelis and Palestinians were hampering the peace process, Merkel said: "The practical situation is more complicated than it appears from a distance."

Olmert stressed Israel will continue settlement construction in annexed east Jerusalem.

"There are places that we will not give up as part of a final (peace) agreement and that is why there is no reason that we stop building there," he said, alluding to large Israeli settlement blocs in the West Bank.

Referring to the so-called roadmap for peace to end the Mideast conflict, Merkel said all sides "have to stick to the conditions as far as possible." She added that Europeans too had responsibilities in solving the conflict. "We shouldn't bite off more than we can chew. But it would be wrong to close our eyes to the problem too," she said.

Germany is to host a conference on the Middle East in Berlin in June with the aim of boosting efforts to build an effective judicial system and police force in a future Palestinian state. Israel, the Palestinians and other Arab states as well as the United States, Russia, the UN and European Union members will be invited to the gathering. Dealing with Iran

Iran remained high on the agenda during talks. Merkel underlined that she was in favour of a concerted common approach to dealing with Tehran which the international community suspects of developing nuclear weapons.

The chancellor however stressed that Germany would pursue a diplomatic solution to the crisis. Earlier this year, Germany joined the five permanent UN Security Council members Russia, United States, France, Britain and China this year in circulating a proposal for a third sanctions resolution against Iran, which the Council approved this month.