A special summit between the United States and the European Union was taking place in Brussels throughout Tuesday with US President George W. Bush in attendance and several unpalatable issues on the menu.

The summit with the 25-nation EU began after morning talks with the leaders of the North Atlantic Treaty Organisation (NATO), with Bush aiming to revive transatlantic ties which nosedived over the conflict in Iraq.

The discussions were due to continue into the evening with President Bush dining with European Commission President Jose Barroso and the EU foreign affairs chief, Javier Solana.

Welcomed by Luxembourg Prime Minister Jean-Claude Juncker, whose country holds the rotating EU presidency, Bush said he was "very happy" to be meeting with his 25 counterparts, most of whom also attended the NATO talks.

The US president faced several thorny topics in his discussions with the EU including the Middle East peace process and the on-going negotiations with Iran. While Europe favors discussions, the US is skeptical that talking will get results.

Bush: attack on Iran "ridiculous"

However, Bush said that reports that the United States was preparing to attack Iran was "ridiculous," but reiterated that no options could be ruled out.

"This notion that the United States is getting ready to attack Iran is simply ridiculous," he told reporters at the evening press conference during the summit. "Having said that, all options are on the table."

Bush then voiced support for an ongoing attempt by British, French and German diplomats to get Tehran to renounce its feared pursuit of nuclear weapons in return for trade and economic incentives.

"You know, we've talked about Iran," said Bush, referring to his two days of discussions in Brussels. "That's a place where I'm getting good advice from European partners.

"After all, Great Britain, Germany and France are negotiating with the ayatollahs with a common objective, something we all want, and that is for them not to have a nuclear weapon," he said. "It's in our interests for them not to have a nuclear weapon.

"It's also in our interest for them not to continue to fund terrorist organizations like Hezbollah, which has the desire to stop the Middle East peace process from going forward," Bush continued.

Iraq conference announced

It was also announced that the EU and the US had agreed to co-host an international conference on Iraq's reconstruction. Juncker told reporters the conference would be organized if the incoming Iraqi government agrees to it.

"Should the new Iraqi government request it, the United States and the European Union are prepared to co-host an international conference to provide a forum to encourage and coordinate international support for Iraq," he said.

Barroso said the EU's executive branch "is, and will remain, committed to a stable and democratic" Iraq.

"We continue to offer substantial political and financial support to the process of democratic transition, and we hope that if the new Iraqi government makes concrete proposals for joint action we will be ready to assist," the EU Commission president said.

China embargo plan creates waves

The positive noises coming from the talks were overshadowed to a point by EU plans to lift a 16-year European arms embargo on China after Bush reiterated Washington's deep concern at the project.

"This is a question which is being examined," Juncker told journalists. "We still haven't reached a final result."

Juncker added that for him Bush's visit represented the "start of a new relationship" between Europe and the United States.

"We have had lots of differences in the past, but it is clear that differences of opinion can not divide us," he said.

Leaders welcome talks so far

German Chancellor Gerhard Schröder hailed the earlier talks with NATO saying they were "good discussions.

"They were very focused on the issues," said Schröder, who caused a stir before Bush arrived in Europe by suggesting NATO was in need of reform, implying that the EU may be a better defense partner. "We concerned ourselves with the real problems facing us, especially in the Middle East but also in Afghanistan."

Italian Prime Minister Silvio Berlusconi also welcomed Tuesday's landmark meetings and stressed the need to speed up training in Iraq "to be able to leave the country in conditions able to ensure its security."