JERUSALEM - Germany's chancellor and Israel's president praised extraordinarily warm ties between the two nations Tuesday, a day after the Israeli and German Cabinets held a historic joint session to mark a new chapter in cooperation six decades after the Nazi Holocaust.

The Israeli public has largely responded with indifference to the three-day visit by German Chancellor Angela Merkel, signaling that the two nations are moving toward an increasingly pragmatic relationship.

Germany is a key trading partner and one of Israel's staunchest allies, avoiding public criticism of the Jewish state even at times when others take Israel to task for its policies toward the Palestinians.

On Tuesday afternoon, Merkel arrived at Israel's parliament, or Knesset, for a red carpet welcome. The German banner was raised alongside the Israeli national flag, and the two nations' anthems were played.

Merkel is to address parliament in German, becoming the first head of government to do so. The honor has largely been reserved for presidents and other heads of state.

Two German presidents have spoken to the Knesset in German since 2000, and hearing the language associated so strongly with the Nazi genocide of six million Jews elicited little reaction in Israel.

Three of 120 legislators said they would leave the plenum in protest during the Merkel speech, among them lawmaker Arye Eldad, whose grandparents perished in the Holocaust.

Israeli author Tom Segev, who wrote a book about the impact of the Holocaust on Israeli society, dismissed the planned protest as a "ceremonial anachronism."

About 1,000 guests will hear Merkel speak, including Jewish, Christian and Muslim religious leaders, former Israeli presidents, Holocaust survivors and residents of Israeli towns targeted by rocket fire from Gaza. "It is an honor for the people of Israel that she (Merkel) is speaking at the Knesset," said parliament spokesman Giora Pordes.

Israel and Germany forged diplomatic ties in 1965, two decades after the end of World War II. As part of the new relations, Germany paid €25 billion ($39.4 billion) to Holocaust survivors in Israel over the past 40 years. About 250,000 Holocaust survivors live in Israel today.

Without referring directly to the reparations, Israeli President Shimon Peres said after a meeting with Merkel on Tuesday that "we were helped by Germany to build our nation, and we are very glad that Germany is now helping all of us to build peace."

Germany, like other European nations, has little influence on the ongoing Israeli-Palestinian peace talks - that's a role largely reserved for the U.S. - but has contributed hundreds of millions of dollars in aid to the Palestinians over the past decade. Merkel is not meeting Palestinian leaders during her current trip to Israel.

During a joint news conference with Israeli Prime Minister Ehud Olmert on Monday, Merkel would not be drawn into criticizing Israel's continued expansion of Jewish enclaves in the West Bank and eastern Jerusalem, which most of the world considers a violation of Israeli promises to the international community.

Olmert even announced, with Merkel by his side, that Israel would keep building in all settlements it plans to keep in a peace deal with the Palestinians. He tempered his defiant remarks by saying he would push to reach a peace deal this year.

Currently, Germany is trying to help set up an industrial park in the northern West Bank, near the town of Jenin, that could create thousands of jobs. Merkel said she would follow the project very closely.

Merkel arrived in Israel Sunday for a three-day visit, accompanied by half her Cabinet. On Monday, the Israeli and German Cabinet ministers assembled for a festive joint session, signing off on a host of joint projects, including setting up a German studies center at two Israeli universities, broadening the exchange of military officers and embarking on joint research projects, particularly in environmental protection.

"I believe that this trip, with a large part of our Cabinet, was an important step in developing German-Israeli ties," Merkel said after her meeting with Peres.

The trip marks the third time Merkel has visited Israel since becoming chancellor in 2005. Segev, the author, said Merkel has taken ties with Israel to a new level.

"It is quite extraordinary that she radiates so much friendship and support for the government of Israel," said Segev. "The public discourse in Germany is much more critical of Israel than she is. I don't really remember a time when Germany so wholeheartedly and uncritically stood by the government of Israel."