The German government has decided not to give Israel a massive subsidy for the purchase of German missile boats, due to the breakdown in Israeli-Palestinian peace talks, both Israeli and German officials said on Thursday.

For months now, Israel and Germany have been negotiating a deal under which Israel would purchase three or four German gunboats to protect its offshore gas fields in the Mediterranean Sea. The deal, first reported by Haaretz, was valued at about $1 billion before any discounts.
---
The German decision not to subsidize the gunboats was first reported Thursday morning by the Israeli website Maariv Hashavua. According to that report, the Germans sent a “secret letter” announcing the decision to Prime Minister Benjamin Netanyahu’s office on Independence Day (May 6). But Haaretz has learned that the news came not in a letter, but in a phone call from Merkel’s national security advisor, Christoph Heusgen, to his Israeli counterpart, Joseph Cohen.

The conversation between Heusgen and Cohen was an extremely difficult one that quickly deteriorated into mutual recriminations. According to a senior Israeli official, Cohen accused the Germans of violating an explicit promise that Merkel made Netanyahu during a joint meeting of the German and Israeli cabinets in Jerusalem in February. Heusgen responded that Merkel never made any such promise.