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BONN — German companies are hesitating to invest in Israel and the Middle East because of the region's stormy political climate, say some media reports here.

Handelsblatt, the nation's leading economic daily, recently ran a full-page story on what it termed the "bad atmosphere" created by a long period of foot-dragging in Israeli-Palestinian negotiations.

Another German daily, the Frankfurter Allgemeine Zeitung, referred to recent anti-Israel demonstrations during an Israeli trade fair in Amman, Jordan, as a sign of deteriorating relations between the Jewish state and its Arab neighbors.

"All this is bound to have a negative impact on our decisions," an unnamed executive was quoted as saying. "Of course, we must consider the general atmosphere in the region."

Handelsblatt quoted a representative in Israel of the German electronics giant Siemens as saying that recent political developments in the Middle East were causing difficulties for the German business community.

Siemens was one of several major German companies that opened offices in Israel during the past few years in hopes of taking advantage of potential economic cooperation between Israel and the Arab world.

Daimler Benz, the largest German industrial conglomerate, also started activities in Israel after the start of the current Israeli-Palestinian peace process. But it has so far failed to invest in any major projects.

Israeli diplomats in Germany emphasized the importance of German investments in the Jewish state.

They cite as an important example a $400 million investment by Europe's biggest automobile producer, Volkswagen, in a magnesium plant at the Dead Sea.

But, as Handelsblatt noted, this investment was made in 1995, when the peace process was still on track and an atmosphere of confidence characterized Israeli-Palestinian relations.

Since then, the paper said, there have been no major German investments in Israel and the prospects for such moves are gloomy.

But Israeli officials here say they are trying to convince German investors of opportunities in the Jewish state despite the peace process stumbling blocks.