It must rank as one of the most extraordinary birthday presents in the annals of modern diplomacy. To mark the 60th anniversary of the establishment of Israel, Germany — the country that hatched and implemented the Holocaust — will today convene its weekly cabinet session not in Berlin but in Jerusalem.

Moreover, Angela Merkel, the German Chancellor, will tomorrow become the first foreign head of government to address a plenary session of the Knesset, the Israeli parliament. And she will do so in German, a language that still sends shudders down the spines of camp survivors.

Frank-Walter Steinmeier, the Foreign Minister and one of the eight Cabinet members coming to Israel, said: “This is a very special birthday for Germans, the opening of a new chapter. We are linked with this country like no other. First because of the darkest chapter in German history, the Holocaust. But also because of the miraculous development of the friendship that developed since then.”

Germany and Israel are ratcheting up their relations in a way that clearly marks out Berlin as Israel’s prime partner in Europe. Ehud Olmert, the Israeli Prime Minister, met Ms Merkel personally at Ben Gurion airport yesterday — something he has done in the past only for President George Bush. Parliamentary statutes have been changed, at Mr Olmert’s initiative, to allow her to speak — until now only heads of state have delivered speeches to full plenary sessions. President Peres is travelling by helicopter with the Chancellor across the country. A banquet is being thrown for her in the foyer of the Knesset.

All this in a country that marched in protest when a West German Ambassador first presented his credentials in Jerusalem. Demonstrators howled down the German national anthem in 1965. And for years Israeli families would refuse to buy German products.

Now Israelis drive to work in VW Golfs or BMWs, spread Nutella on bread that pops out of a Braun toaster and fly Lufthansa.

Accompanying the Chancellor and the German Cabinet, there will be a dozen top German business executives. The joint meeting of two national Cabinets is a gesture of goodwill that began with Germany and France and that has been extended slowly to other European countries, but not to Britain and not to governments outside Europe. On the table will be proposals for joint German-Israeli development aid projects, even in countries that do not recognise Israel, new German studies institutes in Jerusalem and Haifa, a rapid increase in the numbers of exchange students, and a sharing of military know-how.

Sixty-three years after the liberation of Auschwitz, Germany has become a prime supplier of arms to Israel, including Dolphin submarines, which Arab critics say could be used as a platform for launching missiles in the eastern Mediterranean. The military co-operation has been discreet but mutually profitable: Israeli intelligence, for example, sent captured Warsaw Pact armour to West Germany to be analysed. The results aided the German development of an anti-tank system.

The mood music between Germany and Israel seems to have changed for the better under Ms Merkel. In part this is because of her background. She grew up in communist East Germany where the wartime suffering of persecuted socialists was emphasised, rather than the massive extermination of the Jews. “We learnt only late, and I say that for myself too, about how much Germany lost as a result of the Holocaust,” she said recently.

Her support for Israel is explicit — only the lightest of criticism can be expected from her Knesset speech — but is also expressed by her refusal to join the French in public reprimands about Israeli settlement policy. And she made clear long before the birthday visit that she would not visit Ramallah or hold talks with the Palestinian Authority. The focus would be on explaining to the world that the fates of the state of Israel and the German state were now inextricably linked.

In foreign policy terms, Germany calculates that this will give it more muscle in dealing with Washington, but with a Middle East conference scheduled for Berlin in June, it is stirring scepticism in the Arab world. And some politicians from her coalition partner the Social Democratic Party believe that she has leant too far out of the window in support of Israel. Rolf Mützenich, a Social Democrat foreign policy expert, said: “The Chancellor should make clear to our Israeli partners that their settlement policy violates the Annapolis agreements.”

The urge to put more passion and commitment into the German-Israeli relationship seems to come largely from the top in Germany.

An opinion poll conducted by the TNS research institute showed that 91 per cent of Germans felt their country should stay strictly neutral in its dealings with Israel.

In Israel, by contrast, some of the drive for a closer relationship seems to come from the grass roots. According to a Bertelsmann Foundation study, some 22 per cent of Israelis believed in 1990 that reconciliation with the Germans was impossible because of the Third Reich. Now only 9 per cent rule it out.

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