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Chancellor [As translated from German by the official interpreter.]: Good afternoon, ladies and gentleman. I am, as you might easily imagine, extremely pleased indeed that the Secretary-General, Kofi Annan, has come to Germany once more. We welcome him most warmly. And I was also very, very pleased to see how warmly welcomed his speech was that he delivered this morning in the Bundestag plenary building. All political parties agreed in unison that it was a great speech and it got a lot of support and praise. The co-operation with the United Nations, and obviously the support of the work done by the United Nations, is an essential core of foreign political decision making in Germany.

In view of this background, the Secretary-General and myself have had a very extended conversation about the problems that we are faced with today in the field of international foreign and security policy. In this framework, we both found it very, very important to formulate and then to make sure that it is also implemented - a term and a concept of security today, that this is a more holistic concept than just focusing it on the military implementation thereof. We very much agreed that in fact this was a prime job to be done by the Europeans, that they had to make sure that this more holistic concept of this term "security", namely including features of development policy, of the social dimension, and the ecological dimension, were very important, too.

We have then spoken in very concrete terms about the situation on the Balkans, about the situation in Afghanistan, and about the situation in the Middle East.

Obviously those were only some topics amongst many more, but those were the ones we specifically focused on. Now addressing the subject of the Balkans, we were strongly agreed that in fact a success has already been reached by the United Nations Representative, Michael Steiner, who has contributed to the fact that there will now be a government in Kosovo which will contribute tremendously to the stability of that region.

The Secretary-General has also gone in and strongly welcomed the stabilizing role that Germany has taken on and does take on in the Balkans today, and as you all know, we have been called upon by the [former Yugoslav Republic of] Macedonian Government and the President of [the former Yugoslav Republic of] Macedonia, and we have obviously agreed this action with other European partners, that we shall be extending the role of lead nation in [the former Yugoslav Republic of] Macedonia.

As to Afghanistan, the role that Germany has taken in that part of the world, and particularly the role that German soldiers have taken in that part of the world, has been warmly appreciated; and we have also gone in and we have said that we are not thinking about restricting our presence, not thinking about reducing our presence, in this part of the world. We have forces there, that we would possibly be ready to talk about an extension, in terms of time, for our deployment of our soldiers to Afghanistan. Now it is obvious, and I would like to therefore emphasize this fact, that Germany is clearly unable in military terms to take on the role as lead nation in Afghanistan. This is predominantly due to the fact that we are so strongly represented in the Balkans already. I would also not like to conceal the fact that we feel a certain degree of reservation when it is about geographically expanding the mandate over there.

As to the situation in the Middle East, we very strongly share the marked concern that is about the situation in the region and we very much think it is necessary to try to take any hope and any vehicle to hope to return to the negotiation process if at all possible. And we would also like to emphasize that we both very much appreciate the mission undertaken by Saudi Arabia to that effect.

SG: Thank you very much, Mr. Chancellor. Ladies and Gentlemen, let me once again say how happy I am to be back in Germany and to be able to resume this dialogue with the Chancellor on the important issues of the day.

I think the Chancellor has given you a comprehensive idea of what our discussions were about this afternoon, but I would want to add, in the Balkans, and make an appeal to the people of Kosovo that with this Agreement which Steiner was able to negotiate with them, this Agreement that they have accepted, they will be able to form a government for the first time since the elections in November. It is absolutely important that they stick to the Agreement to form the Government and get about the business of governing and focus on the affairs of the people. If they can put their differences behind them, and put the interest of the people and the territory first, they should find ways and means of compromising and getting the job done.

So I appeal to the leaders of Kosovo to show wisdom and leadership at this critical stage and also applaud the success of Steiner and the UN team on the ground.

On the Middle East, if I may say a word, is an issue that has pre-occupied all of us extensively, and recently there are many interesting ideas, particularly the proposal from Saudi Arabia, which comes at an important time and from a quarter that one had not expected to make that proposal at this time. I think it is extremely important that we consider it very seriously as we search for ways and means to break the current tragic impasse in the region.

I think this is a real challenge for the international community to work together to find a way out and I should say that I really appreciate all the work the quartet has been trying to do for a while, the quartet meaning the European Union, the United States, the Russian Federation and the UN, pooling our efforts on this crisis in the Middle East.

And let me conclude my remarks by thanking you, Mr. Chancellor, for your leadership and the support you, and the German people, have given to the UN and the international efforts, not only in the Balkans, but what you are doing now in Afghanistan - the lead role you have taken on in preparing the Afghan National Police and the work you do in developmental and humanitarian aspects of our work. And I do thank you and the people for this important contribution.

Q: Mr. Annan, if I may ask, as someone who has negotiated with Saddam Hussein, how do you assess the likelihood that he will allow the resumption of inspections and that that inspection process will continue and be effective in defusing the current tension with the United States?

SG: As you know, I have agreed to receive an Iraqi delegation in New York on the 7th of March to discuss implementation of Security Council resolutions, including the return of the inspectors to Iraq.

Our last encounter was over a year ago, about a year; it was February last year. Any they will come, I hope, in a constructive and open mood to discuss frankly with me how we get the inspectors back and how they cooperate with the UN.

All their friends, in the region and beyond the region, are telling them to cooperate with the Security Council, and I hope they will. I will know a bit better after I've sat with them. I would only have to hope that they are coming in a constructive spirit.

Q [Translated from German.]: Do you think that the Saudi proposal can be put into effect?

Chancellor: I think the Secretary-General already answered that question, so why don't you just take that for the answer to the question you just put to me.

Q [Translated from German.]: Chancellor, the newspapers are talking about the fact that if Germany were not to take on the role as lead nation, might it possibly be happy to take on what is described as a coordinating role in that region and would you like to see yourself wearing that hat, Chancellor? And then a question to the Secretary-General, you see the present degree of commitment that Germany has shown to Afghanistan, would you expect more of Germany when it comes to Afghanistan?

Chancellor: Now obviously, one can always read lots of things in newspapers, which goes without saying, because newspapers need to be filled, day in, day out, which obviously is a complicated job. But let me say we are wearing a full suit when it comes to this and we do feel satisfied.

SG: On the second part of your question, I have had discussions in Parliament and with the Chancellor and I personally believe that Germany is doing quite a lot for Afghanistan and I applaud their efforts. There has to be burden-sharing and we are encouraging other governments also to step up.

Q [Translated from German.]: My name is Neuhaus and my question is addressed to His Excellency the Secretary-General. Firstly Secretary-General, how is the financial situation of the United Nations at this point in time, and do you expect a stronger contribution from Germany?

SG: Let me first say that the financial situation of the United Nations is not relaxed as a newspaper reported yesterday.

Chancellor: The same as Germany!

(Laughter)

SG: It's improved, but we still need resources. It's improved in the sense that member states, including the United States last year, paid a substantial amount of their arrears and are paying their regular contribution to the UN Budget, but we are facing financial restrictions in the area of economic and humanitarian assistance. The development and the humanitarian assistance budgets are being squeezed because governments are pleading that given the current economic financial and economic environment, their own budgets are having to be cut and therefore they will have to reduce their assistance.

And I have pleaded with governments that given what is happening in the world and our own fight today against terrorism and our discussions about human security, we need to stay committed to the issue of economic development for the long term. Even if one has a temporary difficulty at the moment, we should make a longer term commitment to help the poorer countries do better and to commit ourselves to removing the inequalities between nations and within nations.

And we're going to have a chance to discuss this issue at the Conference on Financing for Development in Monterey and I hope governments will come prepared to make a difference, they will come prepared to get out a message that we are not going to continue doing business as usual and that the world has changed and we are all looking at security in a much broader sense and are prepared not only to engage the political will, but also to make the resources available to get the job done. Thank you very much.