Merkel is sane. She recognizes that tyranny and occupation are two different things. She knows that in Gaza/West Bank it is the terrorists who tyrannize the populace. For example, a Palestinian Arab cannot voice a desire for peace with Israel without risking being labeled a "collaborator" and executed without trial.
link (The oppression of Palestinian Arabs at the hands of "their" tyrant leaders is discussed more extensively in the
http://www.defence.pk/forums/world-affairs/51690-palestinian-struggle-against-israel-9.html thread.)
Can you make a case to me - or to Merkel - that Kashmiris would suffer at India's hands if Pakistan wasn't intent upon supporting an insurgency there, either through native Kashmiris or (most noticeably, according to the diplomatic record discussed in previous posts) Pakistani infiltrators? That is probably what Pakistanis have to attempt in order to change Merkel's mind.