Depends, if you want stealth, the MP5SD5 is quieter than a CAR-15 with a silencer.
Anyway, they still use UZIs rather than the superior MP5s (or Mini UZIs instead of MP5ks), which they've done for years.
They really try to use their own weapons, and try especially hard to avoid German ones.
They don't bother with supressors, because they don't care who hears them when a gunfight starts. In fact, the loud boom from a shorty-CAR tends to make civilians dive for cover. They get into a LOT of gunfights, you know.
As for the UZI, they still use those but they're issued to the Civil Defense. They're also the updated UZI that fire from the closed-bolt, instead of the less-accurate open-bolt of the original design. There are a lot of people that feel the closed-bolt UZI is superior to the HK design in several ways, mostly because the Israelis teach the 'hand finds hand' reloading style that only an SMG that has the magazine well in the pistol grip offers -- the HK guns haven't got this feature. I had an MP5K once, and I can tell you that it's not a fast reloader even when you're not trembling because the shooting you're doing is for real.
BTW, the Israelis were the biggest importer of Sionics-suppressed American MAC-10s before President Gerald Ford banned their export (with silencer) to nations abroad. The IMI-made UZI suppressor used to be a direct rip-off copy of the Sionics can. The whole reason there's a conversion kit for UZIs to go from 9mm to .45 ACP is because of the deep admiration the IMI had for the .45 MAC-10. They used suppressed MAC-10s to take out the sentries in watchtowers in the Entebbe raid in Uganda in 1976.
It's just a matter of preference, and hasn't got anything to do with having a distaste for German guns. They did liberate their country with cast-off Nazi 8mm Mausers, you know. They didn't even bother to demil the Nazi eagle and swastika off most of them, either. The Israelis make very good guns on their own, but still choose what suits them best.