The two governments hold "divergent views" on the conflict and draw "different conclusions" regarding the situation, Merz said at a news conference with Sánchez.
The conservative German chancellor insisted that Germany stood "firmly" with Israel but described its military response in Gaza as "disproportionate".
"Criticism of the Israeli government must be possible, but we must never allow it to be used to incite hatred against Jews," he said, adding that he and Sánchez agreed on this point.
But unlike Sánchez, Merz avoided calling the Israeli offensive in Gaza a "genocide" and made clear that Germany currently had no plans to recognise a Palestinian state, as Spain has done. "This is not on the agenda," he said.
On proposed EU sanctions against Israel, Merz said Germany would finalise its position in the coming days and present it at an EU Council meeting on October 1st in Copenhagen.
Sánchez, meanwhile, voiced his full support for the European Commission's proposed sanctions against Israel, warning that the country's Gaza offensive would leave it 'more isolated'.
Spain's left-wing government has been one of Europe's most outspoken critics of Israeli Prime Minister Benjamin Netanyahu and his military campaign in Gaza, launched in response to the Hamas attack on Israel in October 2023.
On Monday, Sánchez called for Israel to be barred from international sporting events over the war in Gaza, where the UN says Palestinians face starvation.
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