Thank you for the invitation to join you for a discussion of the transatlantic security and defense agenda. I understand this is an annual seminar so part of what I hope to look at is what has changed over the past year. I think there have been some very important changes.

Most important, the climate of German-American relations has changed. The most telling example of that was the very successful visit of Chancellor Merkel to Washington in January. The Chancellor and President Bush had the opportunity to meet on a personal level. They spent more than 3 hours together. I had the chance personally to observe their interaction, and, in my estimation, the duration and personal substantive content of the discussion between them were symbolic of a new era of dialogue and friendship. As has been reported, they have remained in telephone contact since the meeting.

Chancellor Merkel and President Bush found common ground on many issues, paving the way for stronger more concerted transatlantic action on important security challenges. Germany, along with the United Kingdom and France, has been a leader in negotiations with Iran to stop nuclear proliferation. Germany plays a very important role in Afghanistan.

Germany has been engaged with rebuilding Iraq by providing training for the military and the police and by forgiving billions of dollars of Saddam-era debts. The reason we are fighting for freedom in Iraq and Afghanistan is because we know a free world will be more secure, more prosperous, and better for all of us.

Chancellor Merkel and President Bush also spoke of strengthening our economies and intensifying trade as the surest way to create meaningful well-paying jobs at home as well as stronger growth in developing countries. These two leaders know very well that pooling the technological and entrepreneurial strengths of the world's strongest economies is the best way to address the political and economic challenges we face globally.

Their discussions were wide ranging, covering both issues of high importance to our two countries, as well as personal insights, such as Chancellor Merkel's recollections of her experiences growing up in the former East Germany. The President was deeply impressed and commented afterwards that those who have lived under tyranny place an extraordinarily high value on freedom.

Those of us who attended the Munich Conference on Security Policy on February 4 got a reinforced sense of the force and vigor behind Chancellor Merkel’s commitment to freedom in her impressive speech on the importance of the transatlantic cooperation, which also addressed the issue of Iran.

We hope the Iranian regime will heed the clear message of the international community. The world will not stand by if Iran continues on the path to a nuclear weapons capability. The IAEA resolution makes clear the steps Iran's regime must take. It must suspend enrichment-related and reprocessing activities, cooperate fully with the IAEA, and return to the negotiating process based on the previously agreed terms. The Iran issue will now be in the domain of the Security Council as well as the IAEA. This is the start of a new phase of more intense diplomacy, not the end of diplomacy as some might suggest.

Iran will seek to divide the world community on the issue. We cannot allow that to happen. Only through coordinated effort can we keep pressure on Iran to change its behavior - to cease enrichment activities; to acknowledge the right of Israel to exist; and to end its support for terrorism. The United States will continue to consult closely with our European allies, with Russia and China, and many other members of the international community in the coming days and weeks, in this new phase of our diplomatic efforts.

There are obviously a number of concerns related to the Iranian issue. The connection to Israel and its security is clear, particularly in light of the results of the recent elections in the Palestinian Authorities. Elections are also upcoming in Israel.

The Israeli people are going to be very sensitive to how developments affect their security. Iran's efforts to develop a nuclear weapons program -- coupled with comments by President Ahmadinejad [Ah-mad-i-nee-jad] that Israel should be wiped off the face of the earth, repeated as recently as last weekend, must be taken very seriously. It was important that Chancellor Merkel- took those comments seriously and drove the point home, as she did in Munich when she said, "Iran has crossed the red-line."

The Iranian Government has not hidden its hand in using the general dismay of Muslims around the world over the printing of the cartoons of the Prophet Mohammed to incite violence. The world ought to call Iran on that point as well. We all must respect each other's religions. We also need to respect freedom of the press. There is no excuse for violence. Freedom of the press, as Secretary Rice pointed out when she was in Israel on February 8, is one of the most fundamental freedoms of democratic development. We also believe of course that with press freedom comes a certain responsibility. The United States is a place where there is a strong sense of freedom of religion. We know what it means to live together respecting each other's religious traditions and religious sensibilities.

Law enforcement cooperation has been one of the pillars of our joint efforts to fight terrorism. Germany has shared information about terrorists on trial in the United States, and we have shared information about terrorists on trial here. But if we remember Beslan or Bali or Madrid, when a terrorist is on trial, it may be too late to prevent the attack he was planning. So our two countries share what we can about suspected terrorists as well. We work together to prevent the spread of weapons and technologies to countries where they would be abused. U.S. experts from the Department of Homeland Security work closely with German officials to help ensure the security of air travel and sea shipments in German airports and seaports -- and U.S. and German air marshals help secure the aircraft en route. It is in this same spirit that the United States will do whatever we can to help Germany secure the World Cup competition this summer in Germany, following German requests.

Our success in the global war on terror will depend in part on the ability to which we are able to help strengthen the moderate Muslim leaders in the world. The overwhelming majority of Muslims are moderate. They desire a day-to-day existence without violence and a world in which rule of law protects their individual civil liberties. We must support these people in their struggle to avoid having their religion hijacked by violent extremists.
Germany and the U.S., working together, and through NATO and the EU, can help end the underlying causes of terrorism, through cooperation of our security institutions, but also through our support for our own programs as well as those of the UN, the OSCE and other organizations to promote tolerance and rule of law.

Although the challenges of the Cold War are behind us, NATO is still the principle institution through which the transatlantic community engages in strategic dialogue and implements security policy.

In the past year, the Bush administration took to heart comments by Germany, the NATO Secretary General, and other allies that we needed to reinvigorate the strategic dialogue within NATO. We have brought to NATO our key policy makers on the full range of major security policy issues, including on North Korea, Africa, Iran and energy policy. We agree on the importance of using NATO as a forum for political discussion.

NATO is the only place where the United States sits down every day with Europeans, in an alliance, and talks - and acts - on the important security issues of the day. NATO is the central institution for the European-American community to advance its security interests in the world, whether this is helping earthquake victims in Pakistan, supporting the African Union in Darfur, supporting peace and security in Kosovo, reaching out to countries in cooperation in the broader

Middle East, or supporting security in Afghanistan. As an institution, NATO has never been more active in its entire history than it is today.

The US wants to work with Germany and other allies to transform NATO into a more effective tool for handling whatever missions the NATO allies may decide to take on in the future. The challenges of this new century will require a capability to take on humanitarian missions to provide stabilization, reconstruction and reform of failed states. Afghanistan is a test case for NATO as it transforms. Germany, with approximately 2,500 troops in Afghanistan, is playing a major role in ISAF for which the United States is very grateful. Missions in the Balkans helped us prepare for the challenge of working with the international community to help rebuild nations.

NATO is still clearly the best, the most impressive international security organization on the face of the earth. We need common threat assessments and a better understanding of how capabilities of non-allies may pose threats to the NATO nations. We need common planning so that all of us are prepared to meet the challenges. When we were dealing with problems that were relatively static; you could take your time. Today’s world of global networks and non-state actors is far less predictable. Grave threats to our collective security can arise quickly, taking root in perhaps unexpected locations. Therefore NATO has to become more agile, flexible, and expeditionary.

Terrorist organizations are networks of individuals, not nation states. You can't know where the threat is going to come from. You cannot know the nature of the threat. The terrorist has the freedom and the ability to attack at any time, in any place, using any technique. It is physically impossible to defend every location, at every moment, against every conceivable technique. Therefore the only thing that can be done is to have this large coalition of countries working together, trying to stop the proliferation of these dangerous technologies, trying to put pressure on the terrorists all across the world, sharing intelligence, cooperating in law enforcement, making it more difficult for terrorists to raise money, more difficult for them to recruit people, more difficult for them to move and communicate, and more difficult for them to train and plan. That's exactly what we are doing.

We will need to use all the institutions that help to give our community structure and strength. The two most prominent are NATO -- and the EU. Since 1998, the EU has made significant strides in developing its ability to intervene in crisis regions. NATO too is grappling with capability shortfalls. We want the EU to be strong, but also want to be sure EU efforts do not undercut NATO's work by duplicating NATO capabilities or otherwise becoming a competitor for scarce European defense resources. The U.S. has long supported the European Security and Defense Policy (ESDP) based on the understanding that it would help build new European capabilities, especially for operations" where NATO is not engaged," and in a manner that would be cooperative,

not competitive, with NATO. A supportive and cooperative relationship between NATO and the EU should be a natural development.

Whatever our differences were on Iraq in the past, Europe and America together are supporting Iraqis as they build their institutions of freedom. We must help them with economic reconstruction and development, and through political and other support. We appreciate the German government's commitment to these efforts and we hope that Germany will be able to continue the direction it has gone in supporting the Iraqi government.

Our strategy in Iraq, as Secretary Rice put it, is "clear, hold, and build" -- clear the insurgent strongholds, hold the ground you've taken with Iraqis, and build the institutions of the future Iraq. For all the depredations of the terrorist attacks in Iraq, large and increasing majorities of Iraqis believe their country is headed in the right direction. Polls consistently show that Iraqis think their situation will improve, in the short, medium - and long term. We should draw hope from their hope, and do everything we can to prove it well-founded. The emergence of an Iraq that can govern itself, sustain itself, and defend itself is a vital priority for the transatlantic alliance.

The War on Terrorism will take patience and determination - just as the Cold War took patience and determination. We know that there are nation states that are actively sponsoring terrorists, and we know that terrorists are actively seeking increasingly lethal weapons. That is a reality for the 21st century that all free people have to accept and understand and work against. We are on notice. Free people are on notice that these risks exist, and it is up to us as societies and governments to determine whether we will meet these threats with adequate resolve and resources.

Against this backdrop, the transatlantic relationship will serve perhaps its most historic and important role in the “War of Ideas” – defending and promoting the values that bind our transatlantic community together: A shared belief in peace, in liberty, and in human dignity. As long as there are regions and countries in the world where people are denied those things, the U.S. and its allies will be able to offer them hope. And that is our most important mission now.

I believe that one of the key messages that came out of the meeting between President Bush and Chancellor Merkel was the importance of honest and direct dialogue between long time friends. The business community lives by this code with demonstrated results. That is the basis and spirit on which we have succeeded in the past, and that will be the key to the successful future of U.S.-German relations.

Thank you very much.