"There is no financial commitment," said German government spokesman Ulrich Wilhelm.

"There are no concrete negotiations with Israel over a sixth submarine. As for whether there are informal talks — because of the nature of the matter, I can make no statement on this."

Germany had granted Israel significant discounts in previous transactions but Israel would now find it hard to buy the vessels without German subsidies, having decided last week to trim its defense budget by 5 percent in 2011 and in 2012.

The US journal Defense News reported this week that Chancellor Angela Merkel's government had turned down Israel's request for a discount of up to one-third on the price of a $1.6 billion package including two other warships and torpedoes.

Israel's Defense Ministry said in a statement there are no negotiations between the countries over the sale of an additional submarine, "and therefore the subject of assistance in such a purchase is irrelevant."

The full cost of the diesel-powered Dolphin class submarine would be some $700 million.

Others already in Israel's fleet were extensively underwritten by Germany, which is dedicated to the security of the Jewish state, founded in the aftermath of the Holocaust.

Israel had hoped for similar aid on two Meko corvettes, built at ThyssenKrupp's Blohm+Voss shipyards in Hamburg, and Defense News reported that Israeli Prime Minister Benjamin Netanyahu appealed to Merkel personally on the matter.

Wilhelm said the two leaders spoke on the phone over the past week but could not say whether naval aid was brought up.

The United States gives Israel some $3 billion in annual defense grants, but these can be spent only on American or Israeli military products and services.

In a separate report, Defense News said the United States planned to help Israel construct two hardened submarine shelters at the northern port of Haifa by 2012 at a cost of $40 million.

Israeli sources said the structures would help prevent the Dolphins being viewed by the public on Haifa's Carmel Mountain as they are maintained, armed and deployed on missions.