"I believe diplomacy can work so long as the Iranians don't divide Europe and the United States," he told the channel.

"The common goal is for them not to have a nuclear weapon. It's in the interests of the German people and the American people and all people for the Iranians not to develop that nuclear weapon," Bush said.

The European Union has been negotiating with Iran to try to ensure that it does not develop nuclear arms while Washington has left open the threat of military action to persuade it to drop plans to develop nuclear fuel.

However Bush told ARD that the German people should ignore false rumours that he was preparing to launch a war like the one he started in Iraq in 2003.

"The Iranian issue hasn't even moved to the United Nations yet. In other words, there's a lot more diplomacy to be done," he said.

"I know the rumours, and, you know, I've heard all the gossip and the false stories about this. The people have got to know that we will try diplomacy for all means."

Bush also called on Iran to stop supporting the Shiite Muslim extremist group Hezbollah and to begin democratic reform.

"They've got to stop exporting terror through Hezbollah, which could be a devastating blow to the peace process between Israel and the Palestinian people. And they ought to open up their country to more democracy... Give their people a chance to express themselves in a free way," he said.