The presidents of Germany and Israel, Frank-Walter Steinmeier and Reuven Rivlin, joined the inauguration of what they called an "overdue" tribute to the team 45 years after their brutal massacre by the radical Palestinian Black September group.
The €2.3 million memorial entitled Einschnitt (Incision) on the grounds of Munich's Olympic Park features black-and-white photographs of the 11 Israeli victims and a West German police officer killed in a botched raid.
Family members, many fighting back tears, gently lowered a black drape from each of the pictures showing the men in their prime. A Bavarian orchestra played the Israeli national anthem.
Ilana Romano, widow of murdered weightlifter Yossef Romano, told a ceremony including current IOC President Thomas Bach that the team had been "happy and full of pride" to represent Israel at the Munich Games and had "returned home in coffins".
Romano said a decades-long drive by family members to see a memorial built in Munich had long been met with "anti-Semitism and a lack of compassion". She called it "very moving" to see it finally completed.
The 1972 Munich Games had been meant to showcase the new face of Germany nearly three decades after the Second World War.
Black September gunmen took advantage of light security to break into the Israeli team's flat at the Olympic village, immediately killing two of the athletes and taking nine others hostage to demand the release of 232
A bungled rescue operation resulted in all the hostages being killed along with a West German policeman and five of the eight hostage-takers.
The news sent shock waves through Germany just 27 years after the Holocaust and opened a deep rift with Israel.
Rivlin noted that many of the victims had themselves been the children of Holocaust survivors and had come to Munich in a spirit of reconciliation.
He said the international community owed it to their memory to demonstrate resolve against terrorism.
"Forty-five years after the massacre, international terror still threatens innocent victims," he said.
Healing an open wound
"The memorial we are inaugurating today must send a message to the whole world: we must not yield to terror... whether in Barcelona, in London, in Paris, in Berlin, in Jerusalem or in any other place."
Steinmeier said the bloodshed against Jews on German soil had filled the country with shame. He expressed hope the memorial would help heal what was long an open wound.
"For a long time, far too long, the memory of the victims was overshadowed by the perpetrators in the public consciousness," he said.
"We also fight terror by standing by its victims."
Following the ceremony, Rivlin and Steinmeier were to pay a visit to the memorial of the former Nazi concentration camp Dachau.
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