"We have done everything we can from our side to demonstrate our readiness for negotiations with Iran," said Merkel in a joint press conference in the eastern city of Rheinsberg after meeting French President Jacques Chirac.

"We are expecting a positive reaction," she said, adding that there is "wide interest in solving the (nuclear) disputes through diplomatic measures."

"This is not about denying Iran's eventual right to a peaceful nuclear program but about transparency and about respect for the IAEA (the International Atomic Energy Agency)," she said.

Chirac echoed Merkel's call for Iran to cooperate with the UN's nuclear watchdog.

EU foreign policy chief Javier Solana went to Tehran on Monday to present to Iran a package of incentives, which was agreed last week among five UN Security Council permanent members, Britain, China, France, Russia and the United States, plus Germany, in exchange for Iran's suspension of uranium enrichment.

Details of the proposals are unknown, but EU diplomats said they included a light-water nuclear reactor and a foreign supply of atomic fuel for Iran, as well as an offer to suspend sanctions against Iran in the UN Security Council.

The proposals also carry penalties that can be applied by the United Nations Security Council if Tehran does not cooperate, said the diplomats.

Iran's chief nuclear negotiator Ali Larijani said the talks with Solana were "constructive" and the proposals had some "positive points" but some "ambiguities" had to be removed.

Speaking on the state television after receiving the proposals, Larijani said Iran would respond after studying the incentives.