Daniel Coats suggested in a newspaper interview that Germany was one of a number of NATO countries whose relatively low defence spending could threaten the alliance's long-term effectiveness.

"If Germany wants to have the necessary military capabilities, it must dedicate at least two percent of its gross domestic product to defence," Coats told the Berliner Zeitung daily in remarks translated into German.

Germany defence spending this year is a little more than 24 billion euros (30 billion dollars), which corresponds to 1.4 percent of GDP.

Coats welcomed German government efforts to restructure its armed forces.

But he went on: "The experts tell us that military spending in many NATO countries is so low that there is a danger that the alliance will not be able to act effectively in the long run."

He said the United States did not want always to take the lead in the fight against terrorism, "but we are forced to because our allies cannot always keep pace."

Schroeder flies Thursday to the United States, where he will Friday visit the White House for the first time in more than two years.

The main theme of his talks with US President George W. Bush is set to be Iraq and how Germany, which fiercely opposed last year's US invasion, may meet US requests for more help in supporting the financial and military burden of stabilising and reconstructing the country.

Schroeder has ruled out sending soldiers but indicated that Berlin would be willing to consider debt relief.

Germany's Die Welt daily, quoting government sources, said he would make a "significant" gesture, probably by offering to cancel a portion of Iraq's debt and reschedule the rest.

Iraq owes Germany some 2.4 billion dollars, as well as 1.6 billion dollars in accumulated interest since 1990, Die Welt said. It suggested Berlin may be prepared to write off as much as two thirds of that debt.

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