German Chancellor Angela Merkel and French President Jacques Chirac pledged Tuesday to spearhead a new effort to rescue the languishing European Union constitution.

Merkel told reporters after talks with Chirac in a castle outside Berlin that Germany would make fresh proposals to salvage the troubled treaty after it assumes the 25-nation bloc's presidency in January 2007.

"A decision should be reached" on the constitutional pact when France holds the rotating presidency of the bloc in the second half of 2008, Merkel said.

"We have agreed that the constitutional treaty will be reviewed during the German presidency, after a period of reflection."

Chirac said that France "trusts the German presidency to steer the ship in the right direction."

"We have certain problems but we will of course overcome them," he added.

Period of reflection

The EU officially called for a "period of reflection" after last year's double blow when referendums in France and the Netherlands rejected the pact, intended to prevent decision-making gridlock in the expanding union.

To come into force, the constitutional treaty, hammered out by EU governments ahead of the bloc's 2004 expansion, must be ratified by all member states.

EU Commission chief Jose Manuel Barroso said last month that any decision on the future of the constitution should be delayed until 2008, calling for the best to be made of existing treaties in the meantime.

This approach, which received vocal support from France, had been opposed by countries that say the constitution was an overall package to be approved, rejecting the idea of cherry-picking preferred elements.

Weak economy, ambitious expansion

Europeans' skepticism on the constitution is thought to have several roots, including the anemic state of bloc's economy and the EU's ambitious expansion plans following its "big bang" enlargement from 15 to 25 countries in May 2004.

German Foreign Minister Frank-Walter Steinmeier, who was also at the Rheinsberg meeting, has suggested that a change of name could help: the use of the word "constitution," with its connotations of a feared EU superstate, was also widely seen as fueling opposition to the pact.

Iran

Merkel and Chirac also took up the crisis over Iran's nuclear program, with both expressing hopes that Tehran would respond favorably to the latest international proposal aimed at ending the standoff.

"I hope that Iran will send a positive signal," Merkel said, calling the United States' conditional offer to take part in multilateral talks with Tehran "a very important additional step" in ending the stalemate over the Islamic Republic's nuclear ambitions.

"This is not about denying Iran's eventual right to a peaceful nuclear program but about transparency and about respect for the IAEA (the International Atomic Energy Agency)," she said.

Euronext

In the spirit of Franco-German cooperation, Chirac also offered support to German stock market operator Deutsche Börse in its failed attempt to tie the knot with pan-European rival Euronext, which wants to merge with the New York Stock Exchange instead.

"I favor a Franco-German solution for reasons of principle and I regret that this solution was not adopted," he said.

Tuesday's meeting was part of regular consultations arranged in 2001 between Germany and France to improve coordination between the countries seen as the twin engines of European integration.