Germany opposes boycotts against Israel but finds it acceptable to label products produced in West Bank settlements, German Chancellor Angela Merkel said on Tuesday in Jerusalem during a one-day visit with 16 cabinet members.

“We do not support the demands for a boycott. This is not an option for Germany.

We have certain rules of labeling and we have to adhere to those rules, but we do not believe in boycotts,” she said.

Merkel spoke during a joint press conference with Prime Minister Binyamin Netanyahu and ministers from both the Israeli and German governments.

The two leaders spoke about the peace process in advance of the anticipated publication by the end of April of US Secretary of State John Kerry’s framework document for negotiations.

The German chancellor expressed support of Palestinian recognition of Israel as a Jewish state saying it is a critical component of a two-state solution.

She said that she could not judge what should and should not be in the framework agreement that Kerry was working out between the Israelis and the Palestinians but could comment on what the end results should be.

“Once an agreement is reached, mutual recognition would have to take place,” she said, adding that it was a “precondition” for a final-status agreement.

It was also important, she said, that such an agreement would take into account Israel’s security needs, particularly given the constant physical threat to its existence.

“Security is of the essence,” she said.

With respect to the Palestinians, she said, “territorial integrity is also of the essence. So the settlement issue fills us with concern... We do not always see eye to eye [with Israel] on this issue, and I hope that we can overcome these difficulties and that there will be no obstacles to the two-state solution.”

Netanyahu said that boycotts against Israel were immoral and harmful to the peace process.

“Boycotts are neither moral or correct – and I would say, or productive – because actually these boycotts push back peace.

They only serve to strengthen Palestinian intransigence.”

There are 30,000 Palestinians who work in the settlements and the Palestinian economy would suffer without those jobs, he said.

Netanyahu told Merkel, “I hope that others in Europe follow your lead in rejecting boycotts.”

It is important not to confuse boycotts with legitimate criticism of Israel, he said.

“There can be criticism of Israel.

That is legitimate. But it’s hard not to notice the fact that those who call for boycotting Israel are not calling for the boycott of any other country. They boycott only Israel. They blame only the Jewish state and single out Israel, the one democracy – the one true democracy in the whole Middle East,” he said.

To Merkel, he said, “I want to thank you for making clear that the Palestinians who ask us to recognize a Palestinian state have to reciprocate by recognizing the Jewish state.

“The conflict cannot end without the Palestinians basically giving up all national claims to the Jewish state. This is the idea of the two nationstates: they have a nation-state for the Palestinian people, we have a nation-state for the Jewish people, and there are no more claims,” Netanyahu said.

An agreement for a two-state solution would also have to recognize Israel’s security needs, he said.

“Peace must be based on ironclad security arrangements,” he said.

Netanyahu said he sought peace with the Palestinians and hoped they would do the same with Israel.

“I’m ready for a stark agreement that ends the conflict between Israel and our Palestinian neighbors once and for all. I can only express my hope that [Palestinian Authority] President [Mahmoud] Abbas is equally willing to end the conflict once and for all, and of course this will be seen in the coming weeks and months,” he said.

Netanyahu and President Shimon Peres, who met with Merkel later in the afternoon, thanked her for her support for the peace process.

“It carries great significance,” said Peres.

Netanyahu also thanked Merkel for promising to seek legislation to financially compensate those who forcibly worked in Nazi run ghettos during World War II. “This is something that has not been dealt with since the Holocaust.

It is symbolic and also meaningful for many thousands of people who are still recovering from that horror.

The fact that you are working with your government to redress this is something of deep significance.”

The bill set to be submitted to the German Bundestag would provide a solution to the issue of retroactive payments of pensions dating back to July 1997.

According to the Prime Minister’s Office both “governments expressed their confidence that there is a common understanding that survivors who worked in a ghetto will receive full recognition under the [German] social insurance law as soon as possible.”

The reparations announcement was part of a sweeping array of steps Germany and Israel took during a special one-day meeting between the ministers and leaders of both governments.

This kind of joint government meeting, that underscores the special relationship between the two countries, has taken place five times and is expected to continue annually. The last such meeting was held in Berlin in December 2012 and the next one will take place there as well in 2015.

The 2015 meeting would celebrate the 50th anniversary of diplomatic ties between the two countries.

In anticipation of that anniversary, a special logo in the shape of a bow made from the designs of the German and Israeli flags was unveiled Tuesday at the King David press conference.

Eighteen pairs of German and Israeli students submitted designs to a joint committee with members from both countries.

The winning design was by Ariel Wolk and Tisha Metting.

They explained that the bow tie shape symbolized the existing diplomatic ties between the two countries and the infinite future potential of that relationship.

Ministers from both governments drew up a long list of plans to increase ties in security, defense, business and culture.

They plan to work together on water and irrigation projects in Africa.

Israel on Tuesday accepted a German officer to provide consular assistance through its world wide network to Israeli nationals in emergency situations in third-world states where Israel has no diplomatic or consular representation at the relevant time.

Israel and Germany agreed that in the future they would recognize the driving licenses of the other country.

The two governments also launched a working holiday program that would allow young people, aged 18-30, to work for six months of their year abroad in Germany or Israel.

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