The two leaders held a joint press conference at the White House after their talks, and Iran was one of the first topics to be addressed.
Bush said they shared the view that the UN Security Council is the next logical step in dealing with the Iran nuclear crisis. "We spent some time talking about the Iranian issue and the desire to solve this issue diplomatically by working together," he said.
Bush did not say what the UN Security Council should do about Iran's nuclear development program but he did say he wanted a diplomatic solution to the issue.
Merkel said Western countries will not be intimidated by Iran's decision earlier this week to resume work on its nuclear development program.
"I think a very successful chapter, for example, was opened over the past few days and weeks regarding Iran. To us Germans, too, it is totally unacceptable what Iran has said recently, for example, as regards questioning the right of existence of Israel, the statements that were made with relevance to the Holocaust."
She added that the U.S. and the EU3 -- France, Germany, and Britain-- shared a common position and were convinced of the need "to try to persuade as many other countries as possible to join themselves to us, to ally themselves with us, and we will certainly not be intimidated by a country such as Iran."
At Odds Over Cuban Prison
Bush and Merkel also discussed, but failed to agree on, the issue of the U.S. detention facility at Guantanamo Bay, Cuba, where some terrorist suspects have been kept since the 11 September 2001 attacks on the United States.
Merkel called for reforming the international law to address how detainees in the war on terrorism should be incarcerated, and suggested the Guantanamo facility should be shut down.
Merkel had said before her trip that she would raise the issue of Guantanamo Bay with Bush in their discussions.
Bush said Guantanamo Bay plays a vital role in the war on terrorism.
"Guantanamo is a necessary part of protecting the American people, and so long as the war on terror goes on and so long as there is a threat, we will inevitably need to hold people that would do ourselves harm … We are waiting for our own courts to determine how is best to proceed."
The two leaders downplayed the disagreement, calling it a simple difference of opinion.
(compiled from agency reports)