Bush failed to allay European suspicions that he was planning to attack Iran, the major source of transatlantic tension.

"This notion that the United States is getting ready to attack Iran is simply ridiculous," an exasperated Bush said, promptly adding: "Having said that, all options are on the table."

A day after the two old foes had a reconciliatory dinner, Bush trumpeted a promise from all the Nato allies, including crucially France, to train Iraqi security forces, as a sign of an end of the tensions over the war.

"Twenty six nations sitting around that table (at Tuesday's Nato summit) said it's important for Nato to be involved in Iraq - that's a strong statement," he said.

But the commitment of the principal anti-war nations, in particular France, will be minimal: France will contribute to a training fund; it will commit just one official from its Nato offices, and it will not take part in training inside Iraq.

Chirac made clear that, despite American officials' relentlessly upbeat appraisals, he sees the future of the alliance and the transatlantic partnership differently from Washington.

In his opening speech to the Nato summit, he backed a recent call by the German Chancellor Gerhard Schroeder for an overhaul of the alliance.

The German proposal was widely seen as code for the EU rather than Nato to be America's primary partner in transatlantic relations - anathema to the Bush administration.

German officials have suggested Schroeder was misinterpreted and that he merely meant that Nato needed to evolve and have a more prominent political role.

But France, and indeed America and Britain, read his remarks rather differently as part of a push for the EU ultimately to replace Nato.

"France's commitment in the service of peace, like that of its European partners, will also increasingly be expressed in the operations of the EU," Chirac said.

"We must, as the German chancellor underlined, continue to take account of the changes that have occurred on the European continent."

Bush did not address the issue head on but he made it clear that America saw Nato as the key forum for transatlantic discussion on security.

"It (Nato) is the vital relationship for the United States when it comes to security."

He cited Schroeder's call for a rethink of the transatlantic partnership, carefully choosing to interpret it as in tune with his thinking on the need to keep Nato up to date.

"I appreciate so very much the transformation of Nato that's taking place," he said. - The Telegraph, London