George Bush insists the war can still be won

"I understand why the American people are tired of war," he said. "It is an ugly war. But I believe we can succeed."

His comments came as the White House published a report painting a bleak picture of progress towards peace.

Both Democrats and Republicans are pressing for a withdrawal of U.S. soldiers from the region, just six months after the President pinned his hopes on a surge in troop numbers.

Mr Bush confessed at a press conference that he "wants to be loved". It was held in an attempt to put a positive spin on the report, which revealed that the American-backed Iraqi government is failing to meet key goals set by Congress.

The document credited the regime with satisfactory progress on eight benchmarks, unsatisfactory progress on another eight and mixed results on the final two.

The effort by Iraq to get its armed forces operating independently of American units - a crucial issue for the administration's hopes of eventually cutting troop numbers - was one of the areas of "unsatisfactory progress".

Laws enforcing the sharing of oil revenue to help patch up rifts between political and religious factions have not been passed.

And the report said little has been done to disarm warring militias.

"The security situation in Iraq remains complex and extremely challenging," it added.

But although the President has been affected by the souring of popular opinion over the Iraq war, he emphatically refused to cave in on withdrawing troops.

He insisted the full 30,000 extra soldiers had been in the region for only three weeks, and said he would not contemplate a change in course until the U.S. commander in Iraq, General David Petraeus, delivers a more comprehensive report in mid-September.

"Give the general the chance to come back and give us a full assessment on whether it is successful or not," he said.

"We'll have a clearer picture of how the new strategy is unfolding and be in a better position to judge where we need to make any adjustments."

But the president said that any suggestion of a pull-out - even in the autumn - could embolden Al Qaeda terrorists ready to strike at any sign of American weakness.

He said: "Just getting out may sound simple and it may affect polls, but it would have longterm serious security consequences for the United States."

As the arguments went on in Washington, another American soldier died in Iraq - the 3,601st U.S. victim since the conflict began in 2003.

Republican senators have broken ranks in recent weeks to urge a shift in policy, bringing the administration's handling of the war to a head this week.

With presidential and congressional elections looming next year, party leaders fear a huge backlash at the polls over the White House's strategy.

The president said the defectors were "friends" and added he will listen to their concerns.

But he insisted: "Part of the concern is whether or not we can win and I believe that we can and we will win." The House of Representatives are due to vote on a bill demanding the withdrawal of most combat troops from Iraq by April 1 next year.

Mr Bush has said he will veto any withdrawal legislation.

The security problems facing Iraq's government were brought home when thieves stole nearly £150million from a bank in Baghdad.

The raid in the Karrada commercial district on Wednesday is probably the biggest theft in Iraq since the 2003 war to topple Saddam Hussein.

Ever since the U.S.led invasion of Iraq, most transactions have been conducted in cash because of limited facilities to transfer money through banks.

AL QAEDA is stronger than it was a year ago and is in a better position to attack Europe and the U.S., it has been claimed.

The terror network has used its safe haven along the Afghan-Pakistan border to regroup, said an American counter-terror expert.

Despite six years of efforts to destroy it the group is more effective than it was before the 9/11 attacks, says the analyst.

The official spoke to reporters after seeing the summary of a classified report prepared by U.S. counter-terror experts.

He says of Al Qaeda: "They are showing greater and greater ability to plan attacks in Europe and the United States."

The group also has created "the most robust training program since 2001, with an interest in using European operatives".

John Kringen, head of the CIA's analysis directorate, echoed the concerns. He said: "They seem to be fairly well settled into the safe haven and the ungoverned spaces of Pakistan.

"We see more training. We see more money. We see more communications. We see that activity rising."

U.S. Homeland Security Secretary Michael Chertoff said this week he had a "gut feeling" that America faced a heightened risk of attack this summer.