One million people, including former U.S. President Bill Clinton, gathered for the unveiling of the restored Brandenburg Gate on Thursday as Germany celebrated 12 years as a reunited nation. The mood was lifted further after a pledge of friendship was received from President George Bush after weeks of tension between the two countries over Iraq.

While the public holiday focused attention on the lingering gaps between eastern and western Germans, it also gave U.S. and German leaders an occasion to subdue their festering dispute over policy toward Iraq.

Bush, who pointedly ignored Schroeder's re-election two weeks ago, ended a period of chilled silence that has marred the pivotal relationship in past weeks with a warm letter to German President Johannes Rau, praising close German-American ties over the last 200 years.

President's warm wishes revive 'poisoned' relationship

"I extend to you and the people of Germany my warmest wishes on the anniversary of German unification," wrote Bush after top administration officials said last month relations had been "poisoned'' by Schroeder's anti-war position.

The President's congratulations recalled the mutual bonds built up during decades of U.S. backing for former West Germany and West Berlin during the Cold War.

"The United States stood firmly with Germany's people in our common goal of bringing freedom to a united Germany,'' he said in the breakthrough letter. "The end of communism and the fall of the Berlin wall were a great success for both our nations.''

'Shared democratic values deepen the bond' says Bush

"The German and American people have ties that date back to the establishment of our nation. Over the past half century, those bonds were deepened by a shared commitment to democratic values", he said.

Even though Germany's centre-left government remains opposed to any "military adventures'' in Iraq, government officials in Berlin seized on the letter from Bush, seeing it as a signal that the period of frosty relations between the allies had started to thaw.

Chancellor Schroeder's co-ordinator for U.S. policy, Karsten Voigt, said the letter was evidence that the close German-American alliance was still intact even though Berlin continues to have a different position on Iraq. German diplomats said the letter from Bush went far beyond the normal perfunctory congratulations.

Germany receives President's letter ethusiastically

"The American expectations that Germany would be a close ally are still being fulfilled and will continue to be valid,'' Voigt said in a statement to Reuters.

"The treatment of Iraq is still a problem for Germany and the United States. It's time for the weapons inspectors to return, not threaten military strikes.''

The healing process is still in its early stages, with the Iraq issue the main stumbling block. Speaking in Paris late on Wednesday evening after a meeting with French President Jacques Chirac, Gerhard Schroeder said he would not alter his position opposing war in Iraq.

"We defined our position before the election,'' Schroeder said. "After the election in Germany, nothing has changed.''