Defense Secretary Donald H. Rumsfeld urged America's allies to increase their military spending to prevent the rise of a "global extremist Islamic empire."

He also urged the world to work for a "diplomatic solution" to halt Iran's nuclear program.

"The Iranian regime is today the world's leading state sponsor of terrorism," he said in prepared remarks. "The world does not want, and must work together to prevent, a nuclear Iran."

Rumsfeld was in Munich to address a defense conference focused on the relationship between America and its European allies.

The remarks came as the U.N. nuclear agency was meeting in Vienna, Austria to vote on a U.S.-backed proposal to refer Iran to the U.N. Security Council over concerns Tehran may be developing nuclear weapons.

Rumsfeld said terrorists hope to use Iraq as the "central front" in their war, turning it into a training and recruitment area like they had done in Afghanistan under the Taliban. He warned "a war has been declared on all of our nations" and said their "futures depend on determination and unity in the face of the terrorist threat."

"We could choose to pretend, as some suggest, that the enemy is not at our doorstep. We could choose to believe, as some contend, that the threat is exaggerated.

"But those who would follow such a course must ask: what if they are wrong? What if at this moment, the enemy is counting on being underestimated, counting on being dismissed, and counting on our preoccupation," Rumsfeld said.

Rumsfeld was to follow German Chancellor Angela Merkel in the opening speeches on the second day of 42nd annual Munich security conference. In the past defense experts and policy-makers have used the prestigious gathering in southern Germany for frank exchanges.

Rumsfeld said violent extremism is a danger faced as much in Europe as in the United States.

"The struggle ahead promises to be a long war that will cause us all to recalibrate our strategies, perhaps further adjust our institutions, and certainly work closely together," he said.

He said Islamic militants are on the move and have to be checked.

"They seek to take over governments from North Africa to Southeast Asia and to re-establish a caliphate they hope, one day, will include every continent," he said. "They have designed and distributed a map where national borders are erased and replaced by a global extremist Islamic empire."

Likening the war on terror to the Cold War, Rumsfeld said the battle could be won if nations persevered. He invoked Merkel's own experience — growing up in Communist East Germany to become chancellor of a unified Germany.

"Freedom prevailed because our free nations showed resolve when retreat would have been easier, and showed courage when concession seemed simpler," he said.

But he pointed out that the United States spends 3.7 percent of its Gross Domestic Product on national defense while 19 of the 25 other NATO nations spend less than 2 percent of their GDP on defense.

He did not name countries, but Germany, which spends 1.4 percent of its GDP on defense, and others have been under pressure to step up their funding.

"It may be easier for all of us to use our scarce tax dollars to meet urgent needs we all have at home," Rumsfeld said. "But unless we invest in our defense and security, our homelands will be at risk."