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BERLIN (AFP): Israel is arming submarines supplied and largely financed by Germany with nuclear-tipped cruise missiles, influential German news weekly Der Spiegel reports in its issue published on Monday.

The magazine said in a cover story likely to touch off a debate in Germany that Berlin had until now denied any knowledge that German submarines were being used as part of an Israeli atomic arsenal.

In Israel, foreign ministry spokesman Yigal Palmor confirmed only that his country had German submarines in its navy.

"I can confirm that we have German submarines. It's no secret," the spokesman told AFP. "As for the rest, I am not in a position to talk about their capacity."

Israel is the Middle East's sole if undeclared nuclear-armed power.

However, former high-ranking officials of the German defence ministry told Der Spiegel that the government always assumed that Israel was putting nuclear warheads on the Dolphin-class vessels.

The article, based on a months-long probe, cited files from the foreign ministry in Berlin indicating that the West German state was aware of the practice as early as 1961.

Germany has already supplied Israel with three of the submarines in question, footing most of the bill, and another three are to be delivered by 2017 under a recently signed contract.

Meanwhile Israel is weighing whether to order three more, according to the report.

"The Germans can be proud to have ensured the existence of the state of Israel for several years to come," Israeli Defence Minister Ehud Barak was quoted by Der Spiegel as saying.

The report said that Germany hoped to see Israeli concessions on settlements on Palestinian land and approval for the completion of a sewage treatment plant in the Gaza Strip in exchange for the assistance.

Israel sees its existence under threat if its arch-foe Iran goes nuclear. Like the United States, it has refused to rule out bombing Iranian nuclear sites.

Germany, bearing the historical guilt of the Holocaust, is Israel's closest ally in Europe.

But it has sharply criticised Prime Minister Benjamin Netanyahu's pro-settlement policies in the West Bank and annexed east Jerusalem as undermining peace efforts with the Palestinians.

Tensions between Germany and Israel flared in April when Nobel prize-winning German author Gunter Grass published an inflammatory poem warning that a nuclear-armed Israel "could wipe out the Iranian people (with a) first strike."