The United States and the European Union told Iran on Tuesday they were ready to impose more sanctions over its nuclear enrichment programme.

But President George W. Bush acknowledged the limits of U.S. influence over Tehran and, in the twilight of his presidency, appeared resigned to leaving the standoff to his successor.

"I leave behind a multilateral framework to work on this issue," Bush said after a U.S.-EU summit at a Slovenian castle.

"A group of countries can send a clear message to the Iranians, and that is: We're going to continue to isolate you ... we'll find new sanctions if need be, if you continue to deny the just demands of the free world, which is to give up your enrichment programme," he said.

He stopped short of repeating the U.S. position that all options, including military action, remain open. "Now is the time for there to be strong diplomacy," Bush said.

A joint communique after his final summit with the 27-nation EU said both sides were ready to take additional measures on top of three rounds of United Nations sanctions -- an implicit recognition that tougher Security Council action might be difficult due to Russian and Chinese resistance.

Bush met Slovenian leaders, who hold the EU's rotating presidency, as well as European Commission President Jose Manuel Barroso and EU foreign policy chief Javier Solana, who has led efforts to get Iran to scrap its enrichment programme.

The president later arrived in Germany where he will hold talks with Chancellor Angela Merkel on Iran, climate change and oil prices at Meseberg, north of Berlin, before heading to Rome, France and Britain as part of a week-long European tour.

INCENTIVES

Solana is due to travel to Iran at the weekend to present a new offer by major powers of incentives for it to suspend the programme but he has played down prospects of a breakthrough.

"Iran with a nuclear weapon would be incredibly dangerous for world peace," Bush said.

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.