Bush urges Germany to cut business ties with Iran

"My first choice of course is to solve this diplomatically. All options are all the table, but the first choice is to solve this problem by working closely together," he said after talks with German Chancellor Angela Merkel.

Bush expressed support for a European package of diplomatic and economic rewards - put together by Berlin, London, and Paris - if Iran's leaders halt uranium enrichment, which can be a key step towards atomic weapons.

"We'll see what choice they make," he said, one day after the European Union agreed to crack down on Iranian banks. "We'll give diplomacy a chance to work."

Merkel said diplomatic pressure had already shown signs of paying off, highlighted international cooperation in squeezing the Islamic republic, and said that Tehran would face more sanctions if it rejects the incentives plan.

"If Iran does not meet its commitments, further sanctions will have to follow," she said, citing possible EU steps against Iranian banks. "If you look at the situation in Iran then you see that these efforts could be successful but that also requires the international community to act in a unified manner, that means in the European Union as well as at the UN Security Council," she said.

Iran denies Western suspicions that its nuclear programme hides an atomic weapons push and has put up its own diplomatic overture -- which does not include freezing uranium enrichment.

Bush met Merkel as part of what he has proclaimed his last trip to Europe before he steps down in January, a voyage that began in Slovenia Monday and takes him to Italy, the Vatican, France, and Britain.

The US president is still widely unpopular over the Iraq war that Germany, France, and Russia fiercely opposed, as well as his resistance to European-favored strategies for battling climate change.

"I hope that with regard to climate change we will take constructive steps forward in Japan" where the Group of Eight industrialized nations will meet in July, Merkel said after hosting Bush in Meseberg outside Berlin.

Last year Merkel was credited with winning concessions from Bush on climate change at a G8 summit in Germany - albeit non-binding pledges on the reduction of greenhouse gas emissions on which he has been accused of reneging.

Bush urged Germany to step up its commitments in Afghanistan, acknowledging "this is a controversial subject" and has been "a contentious issue between our countries in the past" but stressing: "I believe it's necessary work."

As for the Iraq war, "I don't regret it at all, removing Saddam Hussein made the world a safer place," Bush said, noting "you don't get to do things over in my line of work."

The talks with Merkel came with much of Europe hoping that Democrat Barack Obama

succeeds Bush in January. There were no anti-Bush demonstrations here but several political officials in Berlin, including leading figures from Merkel's own conservative party, said he would not be missed.

"The disaster after the war in Iraq caused serious damage to the image of the United States, and not just in Germany," the foreign policy spokesman for the Christian Union's parliamentary group, Eckart von Klaeden, said.

In 2006, Bush and Merkel bonded over pickled herring and barbecued boar on Germany's Baltic coast and Merkel has tried to strike a balance between rebuilding ties to Washington and keeping the president at arm's length.

This time Merkel, Bush and their spouses dined on asparagus and schnitzel with strawberries for dessert, and strolled together in the gardens of Meseberg Palace, an 18th-century Baroque residence turned government guest house.