CHANCELLOR MERKEL: (As translated.) Good morning, ladies and gentlemen. I see that there are quite a number of you who have made the trouble to come here today. I would like to welcome you very warmly. Let me say that I'm delighted to be able to have this press conference together with the American President after our talks here today. Yesterday we had very intensive talks over dinner. We had intensive talks this morning. We're going to continue them over lunch later on. Let me say that I'm very, very pleased to have the President of the United States here as our honored guest in this guest house of the government.

We had a very good atmosphere. This atmosphere shows -- I think shows very clearly that we have constructive dialogue at virtually all levels on virtually all issues. We've had that for quite some time, and we're going to continue this dialogue in the next few months to come.

We debated on the issues that are of global importance. First, the world trade round, Doha. I'm very glad to note that we have a common interest in seeing this Doha Round to come to a successful conclusion. Free trade, particularly looking at the problems that developing countries have, as regards food, for example, food supplies, food prices, I think this trade round is absolutely essential for a balanced situation in the world at large. We have every chance to come to a successful outcome. We will see to it, we will pool all our efforts in order to bring this about, and also in the period leading up to the G8, we will hopefully be able to activate all our efforts.

This G8 meeting in Japan will deal with very important issues -- for example, with climate change. During the G8 meeting there will be also a so-called meeting of the major emitters. We do hope that all of the issues that we started to talk about in Heiligendamm can be brought forward, in the sense that it is made clear we need a global agreement under the roof of the United Nations, but each and everyone has to take his or her share of that particular issue, and developing countries obviously will be in on this, too.

The Heiligendamm process will also be continued. That is to say, the O5 will be in on this, and what will be in the foreground here are food prices, energy prices. We also discussed this here, in our meeting. There are basically two things that I think we need to do. On the one hand, there are a lot of speculations that are possible because -- as regards energy prices -- because the consumption and the demand is not yet sort of safely predictable. So we need to tell those countries how they intend to make to make themselves independent of gas and oil supplies, to these emerging economies; how can we actually further develop technology; what could we as industrialized country provide these emerging economies as regards technology, modern technology.

We in the European Union have initiated a number of activities; particularly Germany has held a very intensive discussion also on what renewables and new technology means in this respect. We talked about the transatlantic dialogue, about projects that are also quite difficult. Yesterday there was the EU-U.S. summit, or rather two days ago, and a lot of these issues were also on the agenda there.

As regards transatlantic economic cooperation, I would like to see us work together close also on biofuels. We have taken over very clear commitments here. We also know we need to have certain standards. We must not come into competition with food production, for example, here.

Then on international issues, Afghanistan was discussed; progress in the Middle East; Iran, the offers we put on the table to Iran, but also the fact that if Iran does not meet its commitments, then further sanctions will simply have to follow. We again said we want to give room for diplomatic solutions. We want to give diplomacy a chance, but we also have to stay on that particular issue. These were constructive, very intensive talks -- talks that were characterized by a friendship between us. And I think this can lend a contribution towards solving a number of issues that are outstanding in the world at large, and we show at the same time transatlantic cooperation between Germany and the United States is working very well. Thank you again, Mr. President, for coming, and a very warm welcome.

PRESIDENT BUSH: Madam Chancellor, thank you for the invitation to this beautiful place, a modest little cottage by the lake, it is -- I'm really glad you thought of this location. Laura and I loved our dinner last night. For those in the German press who thought I didn't like asparagus, you're wrong. (Laughter.) The German asparagus are fabulous.

But anyways, it's a great place for -- to relax and have a good discussion. Our relationship is strong and our relationship is active. And I assured the Chancellor that when I say I'm going to sprint to the finish, that's what I mean. And that we had a lot of -- we've got a lot of issues that we can talk about.

I first want to thank the German people for their contributions to helping the people of Afghanistan realize the blessings of a free society. I know this is a controversial subject here, but I hope when the Afghanistan debates go forward, I hope people here think of young girls who couldn't go to school in the past but now can; or think of mothers who bring their babies to health clinics for the first time; think about farmers who now have got access to markets to help deal with food shortages. This is hard work, I understand that, to help a young democracy grow after years of tyranny. But I believe it's necessary work. And Madam Chancellor, I appreciate your leadership on this issue.

I also want to thank you for the contributions you're making to the young democracy in Iraq, as well. This has obviously been a contentious issue between our countries in the past, but what shouldn't be contentious is the mutual desire to help advance freedom in the Middle East as the great alternative to the ideology of the haters and the murderers; those who espouse violent extremism to advance their agenda.

We talked about, you know, progress in the Holy Land for the establishment of a Palestinian state. I'm still optimistic that we can get a state defined, clearly understood by both parties before the end of my presidency.

We talked about Iran, of course. I told the Chancellor my first choice, of course, is to solve this diplomatically. All options are on the table and that -- but the first choice is to solve this problem by working closely together, by sending a dual message, which has been the consistent policy of this administration, that if you verifiably suspend your enrichment programs you'll end your isolation, and there's a way forward for you.

The Iranian regime has made a choice so far, and it's a bad choice for the Iranian people. The Iranian people deserve better than being isolated from the world. They deserve better from having, you know, their government held up as, you know, unsafe and not trustworthy. And so the message from the EU Foreign Minister Solana will be: There's a better choice for you. And we'll see what choice they make.

We talked about Lebanon and the need for that young democracy to survive.

We did talk about global climate change, of course. The Chancellor started a very good process here in Germany nearly a year ago. As a result of her leadership, the United States is working very closely with, you know, other major economies to develop a common goal. Step one of solving a problem is for nations who actually emit carbon dioxide to agree to a goal. And that's just not European nations; that's the United States along with China and India. Once that goal is agreed to, then develop long-term and interim strategies that are binding strategies to meet those goals.

So that's the process we're going forward. It turns out the major economies meeting is working concurrently with the G8 -- meeting at the same time as the G8. And the objective is to be able to announce a long-term binding goal at the G8, as well as the major economies meeting, Madam Chancellor, on a process that you started.

We talked about Doha. You know, it's -- I'm a free trader. The Chancellor is a free trader. The question is, you know, is there a commitment to free trade in the face of protectionism? A lot of protectionism in the American political scene these days. I'm sure there's some protectionism here in Germany. I happen to think it would be, you know, disastrous for the world economy and disastrous for poor nations if we didn't trade freely and fairly.

One way to make that commitment is for the Doha Round to succeed. I assured the Chancellor that we're committed to the Doha Round. We will work hard to achieve it. The Transatlantic Economic Council is a very important council that we started together as a way to resolve our differences, to make sure that trade is fair and free.

All in all, relations with Germany are strong, as I told you. And that's good and that's important. And Madam Chancellor, I want to thank you for your friendship, as well.

CHANCELLOR MERKEL: Well, we now have the possibility to take questions. Maybe we ought to start with a German correspondent.

Q (As translated.) Mr. President, Madam Chancellor, you spoke about Iran at some length. In Israel the press writes that Israel might well contemplate action against this threat that Iran poses to them. What would be your -- what are you saying, Mr. President, to the Israeli government? And you said, Chancellor, give diplomacy a chance. Madam Chancellor, Mr. President, how long would you say diplomacy has to be given a chance? Can we exclude that during your term in office military action will be taken -- will take place against Iran, Mr. President?

And you, Chancellor, how do you assess the era of George Bush? In your party, one of your leading party members said that you will not miss George Bush. Will you miss him?

And a question directed to both of you -- why do you, Mr. President -- I think -- don't ask for too long, but why do you -- why are you seen as so unpopular, Mr. President, in Germany?

PRESIDENT BUSH: I just told you that all options are on the table, and my first choice is to solve this diplomatically. And the best way to solve it diplomatically is to work with our partners and that's exactly what we're doing. And the message to the Iranian government is very clear: that there's a better way forward than isolation, and that is for you to verifiably suspend your enrichment program. And the choice is theirs to make. Obviously we want to solve this issue peacefully and so we'll give diplomacy a chance to work. And I want to thank the message that came out of the EU meeting yesterday, which is that if they choose to be -- continue to be obstinate, there will be additional sanctions.

CHANCELLOR MERKEL: We talked just now at some length about this. I very clearly pin my hopes on diplomatic efforts and I believe that diplomatic pressure actually already has taken effect. If you look at the situation in Iran on the ground, you see that quite clearly. These efforts can have a success, but this presupposes, obviously, that the global community is sort of unified. Both in the European Union and in the world [sic] Security Council we have to continue this common approach. We cannot exclude either that there may well be a further round of sanctions, and those need to be negotiated in the Security Council of the United Nations.

What's important now is to see to it that this last round of the sanctions is actually implemented and can take effect, because the effectiveness of sanctions is actually been proved only once they are taken seriously. And we are under certain -- quite a considerable pressure to act together and in concert. And we in the European Union will do everything to see to it that this actually happens.

As regards our relationship, you know that this is a relationship characterized by friendship. It's a direct and candid relationship when there are differences of opinion. Whenever they were differences of opinions, we actually called a spade a spade. It's actually nice about the President, that you can actually call a spade a spade with him. And when, for example, I had -- as regards to the climate change discussion last year, this year, when we -- ever we had differences of opinion, there was a way forward, there was a constructive way forward.

And I think that this initiative on climate by the European Union is a very important initiative. The President himself took actually forward action on this, apart from military action that we do together -- for example, in Afghanistan, in the general international negotiating processes.

We also need on other areas between the European Union and the United States -- not only Germany and the United States -- a lot of close cooperation in many areas, and there was always greater -- great openness here between us. This cooperation is fun, I must say, and as the President said, it is going to be a sprint to the last day of his office. And I trust -- often trust that we shall have other similar meetings of this kind -- candid and open and constructive.

I'm looking forward to the G8 summit in Japan. I hope that we can make further progress on climate protection, which -- talking about targets now -- that is to say, some kind of binding targets -- I think is already great success.

Q Mr. President, back on Iran, can you talk a little bit about -- well, Iran has signaled that it seems likely to reject Mr. Solana's offer, presenting on behalf of you and the EU. What have you and your European counterparts agreed upon in terms of new measures against Iran, if that is indeed the case?

And to Chancellor Merkel, what is Germany willing to do specifically whether in implementing the sanctions already in place, or taking further measures beyond those?

PRESIDENT BUSH: That's exactly what we discussed: How do you implement sanctions that are already in place, and should we levy additional sanctions? Our position is, is that we ought to enforce the sanctions that are in place, and we ought to work with our allies to levy additional sanctions if they choose -- if the Iranians choose to continue to ignore the demands of the free world.

CHANCELLOR MERKEL: I personally have always come out very strongly in favor of seeing to it that sanctions are decided at the level of the United Nations Security Council, too, because including China and Russia obviously makes for much greater effectiveness of such sanctions. But that doesn't exclude that within the European Union, too, we may discuss, for example: Are further possibilities open, for example, in the banking sectors? But these further possibilities, these further measures, must not lead to a situation where at the greater -- the bigger stage, so to speak, we then relent, because the more countries are in on this, the more the effect -- the more effective the impact will be on Iran, for example.

We always think that quite often, on the one hand, people like to reject certain measures to be taken, but let us think of the people in Iran. This is what is essential. I think these people deserve a much more -- sort of a better outlook also as regards their economic prospects. And we would hope for the leadership in Iran to finally see reason. I mean, just look at the reports of the IAEA. They -- it says clearly -- the report states clearly that certain violations of agreements that were entered into have taken place, and we -- it means that we need to react to this, even if it -- with further sanctions, if that's necessary.

Q Mr. President, on the way to Europe, you gave a very interesting interview for The Times newspaper in which you basically said that you regret your war rhetoric. Now I'm wondering, do you actually just regret your war rhetoric, or do you regret having gone to war with Iraq?

PRESIDENT BUSH: I don't regret it at all. Removing Saddam Hussein made the world a safer place. And yes, I told the guy -- the guy said, now what could you do over? First of all, you don't get to do things over in my line of work. But I could have used better rhetoric to indicate that one, we tried to exhaust the diplomacy in Iraq; two, that I don't like war. But, no, the decision to remove Saddam Hussein was the right decision.

Myers. Tell me -- no, no, Eggen, Eggen, excuse me. I called you yesterday, Myers. What's the difference? (Laughter.)

Q Thank you, Mr. President. Thank you, sir.

PRESIDENT BUSH: Yes, no problem. (Laughter.)

Q Speaking of Iraq, there are increasing controversy in Iraq over the security agreement that's being negotiated. Some top Iraqi officials are calling for a dramatic reduction in the U.S. presence. Does this concern you that the direction of those negotiations are going in?

And Madam Chancellor, does this have any impact on your approach towards Iraq?

PRESIDENT BUSH: First of all, I think we'll end up with a strategic agreement with Iraq. You know, it's all kinds of noise in their system and our system. What eventually will win out is the truth. For example, you read stories perhaps in your newspaper that the U.S. is planning all kinds of permanent bases in Iraq. That's an erroneous story. The Iraqis know -- will learn it's erroneous, too. We're there at the invitation of the sovereign government of Iraq.

And I strongly support the agreement because I think it helps send a clear message to the people of Iraq that, you know, that security you're now seeing will continue. And one of the lessons of Iraq is, is that in order for a democracy to develop or in order for an economy to develop, there has to be a measure of security, which is now happening. So I think we'll get the agreement done.

And as I said clearly in past speeches, this will not involve permanent bases, nor will it bind any future President to troop levels. You know, as to -- look, Eggen, you can find any voice you want in the Iraqi political scene and quote them, which is interesting, isn't it, because in the past you could only find one voice, and now you can find a myriad of voices. It's a vibrant democracy; people are debating. There's all kinds of press in the Iraqi scene, of course to the benefit of the Iraqi society.

And I deal with Prime Minister Maliki. He appreciates our presence there, and he understands that we're returning on success; as the situation merits, and the situation improves, we're bringing our troops home. And I'm pleased with the progress. I don't know whether or not it's -- the progress has made it here to Germany or not yet, but the progress in Iraq is substantial, and it's going to help change the Middle East for the better. And I love the idea of having -- giving people a chance to live in a free society. The blessings of freedom are -- shouldn't be just a regional blessing; I believe freedom is universal and I believe freedom yields peace.

Madam Chancellor.

CHANCELLOR MERKEL: Well, obviously, from the German side, too, and the European side, for that matter, we have every interest, indeed, a vital interest in seeing Iraq taking a turn for sort of a good kind of development. I invited the Iraqi Prime Minister here to Germany, and I think he will pay us the honor of a visit. We have been trying to have economic relations. We've also, outside of Iraq, also trained security personnel, and we're ready to continue that.

So everything we can do beyond a sort of military presence, everything we can do as regards civilian building up of the country, assisting them is something that we're continuing to doing. And I would like to very much look forward to the visit of the Prime Minister. We're glad to see progress happening there on the ground, because it's in our vital interest to see to it that this region takes a turn for the better, and it's in the interest of the region, too.

Thank you very much.

END 11:57 A.M. (Local)

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