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BERLIN, Thursday (AFP) Indian Prime Minister Atal Behari Vajpayee has said he would retire if he fails to make peace with Pakistan over Kashmir, Der Spiegel magazine said in its edition coinciding with his visit to Germany.

Vajpayee has hinted Kashmir would be his last peace initiative, and when asked what would happen if he failed he said: "Then I have to accept my defeat, then I'll have to go into retirement."

"I have emphasised more than once that we want peace with Pakistan and are striving for friendly cooperation," he told the weekly German news magazine in a wide-ranging interview.

"The geographical location of the two countries alone makes it essential for India and Pakistan to have good relations. We all only stand to gain by no longer exhausting ourselves in a nonsensical confrontation."

Vajpayee also said that the two countries "are partners in an international coalition against terrorism and in order to fight it everywhere we need to support each other." Vajpayee offered on April 18 a "hand of friendship" to Pakistan, which had been calling for dialogue for several months.

He said it was his third and final bid for peace between the neighbours, who have been at loggerheads since the subcontinent was partitioned in 1947.

Meanwhile India indicated it would welcome talks with Pakistani Prime Minister Zafarullah Jamali should the South Asian neighbours convene a summit as the "last" step in the resumption of a peace process. "Jamali is the prime minister of Pakistan. We will definitely be talking to him. As for who will be representing the people of Pakistan, it is for them to decide," junior Foreign Minister Digvijay Singh told the NDTV news channel.

"Of course the man who is the prime minister of Pakistan is representing Pakistan," he added.

Pakistan President Pervez Musharraf said this week that Jamali would lead the summit-level dialogue with Indian Prime Minister Atal Behari Vajpayee.

Singh said a summit would be the "last" step in the peace process.

"We are in a process. That (summit) will be the last one. The basic steps would be economic, restoration of air links and MFN (most-favoured nation) status (to India). Then we have to discuss the agenda," Singh said.

Meanwhile a top US official saide that The United States was "encouraged" by a recent shift in ties between India and Pakistan that has seen the nuclear rivals come closer than ever to normalizing relations.

"It's not that there isn't more to be done, there is more to be done," said Condoleezza Rice, US President George W. Bush's national security adviser, but "we're in fact encouraged by recent trends in the relationship."

Earlier, Islamabad named its first ambassador to New Delhi in 12 months, career diplomat and foreign ministry spokesman Aziz Ahmed Khan, a move that followed by a fortnight India's naming of its envoy to Pakistan.

"The key here is that India and Pakistan themselves move the relationship forward. It's not something that can be moved forward by the will of the G8," Rice told reporters in a briefing on Bush's upcoming trip to the June 1-3 summit of the seven major industrialized nations plus Russia.

Bush "has been very involved" in efforts to defuse tensions between the nuclear-armed rivals, she said, and is "looking forward" to welcoming Pakistan President Pervez Musharraf to the Camp David retreat on June 24.

The meeting will come as part of an official, week-long visit to the United States by Musharraf, Pakistani officials said earlier this month.

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