Blair wants to push the issues further up the agenda after his government published a major report this week which said that global warming could cost the world's economies up to 20 percent of their gross domestic product.

Merkel, whose government will take over the presidencies of the European Union and the G8 group of industrialised nations in January, is also expected to discuss the Middle East, Iran and Darfur with Blair.

"The prime minister will want to talk about how to take forward the work on energy and climate change as priorities for the EU and G8," the spokesman told AFP.

While London is keen to broach the climate issue, German government spokesman Ulrich Wilhelm said the main foreign policy themes of the talks could be Iran, the Mideast peace process, North Korea.

The German spokesman said Blair and Merkel are "in intense contact" on Berlin's upcoming G8 presidency, which is also expected to continue Blair's focus on aid for Africa when London held the reins last year.

For Blair, energy security and climate change are "two sides of the same coin" and the Stern report on the economic impact of climate change has underlined the need for action, his spokesman said.

The prime minister believes there is a "real opportunity" for the EU to agree a new energy and climate change strategy, he added.

Former World Bank chief economist Sir Nicholas Stern's climate change report, which was published Monday, said that combatting global warming would cost about one percent of GDP, 20 times less than the potential cost of doing nothing.

In particular, the report recommends a huge expansion of carbon-emissions trading networks, like that set up by the 25-nation bloc, which aim to limit pollution by by allowing industries to buy and sell their emission rights.

Britain, which under Blair has become one of Europe's most deregulated economies, is keen to see the EU's carbon-trading market expanded to tie in with other similar ones around the world.

Among other issues, top agenda items will likely include the Iran crisis. Both Britain and Germany are among six countries grappling to defuse a standoff with Tehran over its nuclear plans.

They are also likely to discuss Afghanistan, where Taliban fighters have mounted an increasingly deadly campaign against British-led NATO forces in the south. Germany also has a major presence there.

Closer to home, the pair may take the opportunity to discuss the future of the near-dead EU constitution, which was dealt an almost knock-out blow by referendums in France and the Netherlands last year.

EU heavyweight Germany has pledged to come up with proposals to revive the bloc's constitutional plans during its six months at the EU's helm starting on January 1.

Merkel is widely seen as a key part of a new generation of leaders in Europe, while Blair is set to stand down next year, along with French President Jacques Chirac.

The two leaders will hold a joint news conference after their talks, at around 1830 GMT.

After the press conference Blair and his barrister wife Cherie will hold a private dinner for Merkel and her husband Joachim Sauer, a scientist.

The German couple will return to Berlin on Saturday, the German spokesman said.

All rights reserved. © 2005 Agence France-Presse. Sections of the information displayed on this page (dispatches, photographs, logos) are protected by intellectual property rights owned by Agence France-Presse. As a consequence, you may not copy, reproduce, modify, transmit, publish, display or in any way commercially exploit any of the content of this section without the prior written consent of Agence France-Presse.