"I am not against Mr Putin but also not against the idea," Merkel said at a semi-annual news conference in response to a question about the U.S. shield plan. "I have always said that one cannot say there's no threat coming from Iran."

While her Defence Minister Franz Josef Jung has explicitly backed the U.S. plan, Merkel has been cautious when speaking about it and had not previously linked the shield to what the West perceives as the future threat of a nuclear-armed Iran.

Iran says its nuclear programme is peaceful and will only be used to generate electricity, not to produce atom bomb fuel.

Washington wants to place 10 interceptor missiles in Poland and a radar facility in the Czech Republic to protect the United States and its allies against potential missile attacks from what it calls "rogue states" such as Iran and North Korea.

The siting of elements of the anti-missile shield close to Russia's borders has infuriated Moscow, however, and it has threatened in response to target its own missiles at Europe, prompting talk of a new Cold War.

Russian President Vladimir Putin last week suspended Moscow's participation in the Conventional Forces in Europe, or CFE, treaty from mid-December.

But he has noticably toned down his threats since proposing a collective missile shield last month in which Russia and European states would participate along with the United States.

Merkel's coalition partners, the centre-left Social Democrats, have joined Russia in opposing the U.S. missile shield plan. They have also praised Putin's counter-proposals.

Merkel said on Wednesday that Putin's suggestions had brought Russia and the United States a little closer together.

"Thanks to the Russian proposals we no longer talk about whether we have to have a missile shield, but how can we do it together," she said.

NATO would also have to think about areas of Europe that would be left unprotected by the U.S. shield, Merkel added.

"We in Europe will have to think again about whether we need to fully cover Europe. Southern Europe won't be covered and this will have to be discussed in NATO and in the NATO-Russia Council," Merkel said.

Polish President Lech Kaczynski said this week in Washington that the U.S. anti-missile shield would be built in Poland despite Russian objections, while the Czech government has agreed to begin negotiations on hosting the radar.

A majority of the public in both countries oppose the plan, however, recent opinion polls have shown.