Israeli Prime Minister Binyamin Netanyahu has been holding tense talks with German Chancellor Angela Merkel as plans to build thousands of new settler homes on occupied Palestinian land strained ties with key allies.

On a visit that risks being overshadowed by the diplomatic storm, Netanyahu joined Merkel for a meeting on Thursday morning after they had dinner late on Wednesday, together with most of their cabinet ministers.

The Israeli leader arrived from Prague where he had singled out the Czech Republic for its “friendship and courage” as the only European state to have opposed a Palestinian status upgrade at the United Nations last week.

Netanyahu’s first European visit since the UN vote came amid mounting international calls for Israel to drop plans to build 3,000 new settler homes in a highly contentious strip of the occupied West Bank near Jerusalem.

He announced the move in reaction to the upgrading of Palestine to non-member observer state at the UN and has refused to go back on the decision despite strong international condemnation.

“Germany abstained from voting, which was seen as a slap in the face by many in Israel, and that’s what Binyamin Netanyahu said he was disappointed about,” said Al Jazeera’s Nick Spicer, reporting from Berlin. “When they came and spoke to the press, they were very keen not to underline their differences.”

‘Disappointed’

German daily Die Welt on Thursday quoted Netanyahu as saying he was “disappointed” that Berlin had abstained from voting at the UN despite reported pleas by Israel to reject the Palestinian resolution.

“People are convinced that there is a special relationship between Germany and Israel,” he said.

“I think Chancellor Merkel was of the opinion that this vote would in some way foster peace. In fact the opposite is the case: after the UN vote, the Palestinian Authority under president (Mahmoud) Abbas is making plans to join with the terrorists of Hamas.”

France, Britain, Spain, the European Union, Denmark, Sweden, Australia and Egypt have all summoned the Israeli ambassadors to protest against the plans, which also drew criticism from Russia and Japan.

Germany, long considered Israel’s closest ally in Europe with ties rooted in the country’s bid for atonement over the Nazi holocaust, stopped short of such a move.

But Merkel sharply condemned the policy as potentially torpedoing hopes for peace and the viability of a Palestinian state.

“Israel is undermining faith in its willingness to negotiate and the geographic space for a future Palestinian state, which must be the basis for a two-state solution, is disappearing,” her spokesman Steffen Seibert said this week.

The new tensions came just days after Merkel had offered Israel full support for its military action in Gaza in response to repeated rocket fire.

A Palestinian group said it would hold a demonstration outside the chancellery against “atrocities” committed by Israel during the Gaza campaign, as heavy snow fell over the German capital.

Growing Isolation

Israel’s settlements stance has also worried the United States, its staunchest ally, which asked it to reconsider the decision.

But Netanyahu, who is facing stiff opposition at home ahead of a snap election next month, has refused to go back on it.

During his stay in Prague, Netanyahu appeared to acknowledge his government’s growing international isolation.

“Thank you for your country’s opposition to the one-sided resolution by the United Nations, for your friendship, for your courage,” Netanyahu told reporters following talks with his Czech counterpart Petr Necas.

“The Czech Republic stood with the US, Canada and a handful of other countries against the prevailing international current, but history has shown us time and again that what is right is not what is popular.”

The Israel-German joint cabinet meeting, the fourth of its kind, was to focus on “innovation, education and sustainability”.

While in Berlin, Netanyahu will visit German Foreign Minister Guido Westerwelle a holocaust memorial at a railway station from which the Nazis deported thousands of German Jews to the death camps during World War II.

(Agencies and Al Jazeera)