All agree Iran should not be allowed to acquire nuclear weapons. Tehran insists its programme is for civilian purposes.
But it remained unclear how far the Europeans, who rarely echo Bush's harsh rhetoric against Iran and have sometimes been reluctant to get tougher, would be willing to go.
Washington has pressed the EU to deny some Iranian banks access to the world financial system. European External Relations Commissioner Benita Ferrero-Waldner said further EU steps could entail a freeze on Iranian bank assets.
An Iranian newspaper said Tehran was withdrawing assets from European banks and converting some foreign exchange holdings into gold and equities to neutralise the impact of sanctions.
MORE COOPERATIVE
Bush was accused by critics of "cowboy diplomacy" early in his presidency, but the rancour has eased somewhat after he took a more cooperative approach in his second term.
After clashing with former Chancellor Gerhard Schroeder over the 2003 U.S.-led invasion of Iraq, he has forged a close relationship with Merkel, a pro-American conservative who grew up in communist East Germany.
Merkel has not shied away from criticising Bush over issues like the U.S. military prison in Guantanamo Bay but, like other European leaders, she is looking increasingly past Bush to his successor who will be chosen in the November election.
Bush acknowledges he is unpopular in Europe, as well as at home. "A lot of people like America. They may not sometimes necessarily like the president," he told Slovenia's Pop TV.
On climate change, EU policymakers say they have given up trying to get Washington to join with the bloc in signing up now to binding cuts of greenhouse gas emissions.
Bush repeated on Tuesday that the United States would not agree to cuts until big developing nations such as China and India made commitments too, but he said a global climate deal could still be reached during his presidency.
He also reaffirmed his strong dollar policy, even as the U.S. currency traded close to a historic low against the euro.
"We believe in a strong dollar and that the relative value of economies will end up setting the valuation of the dollar," Bush told a joint news conference in Slovenia.
