WASHINGTON - President Bush said yesterday that he wanted to work with Democrats on compromise legislation to pay for the Iraq war but would carry through on his threat to veto any spending bill that sets a timetable for U.S. troop withdrawal.

"I'm optimistic we can get something done in a positive way," Bush said in a Rose Garden news conference with leaders of the European Union.

The bill, which Bush has long threatened to veto, was expected to reach his desk today. Congress last week approved the $124.2 billion measure, which calls for troop withdrawals to begin by October.

Senate Majority Leader Harry Reid (D., Nev.) urged Bush to reconsider his veto.

"If the president wonders why the American people have lost patience, it is because the news out of Iraq grows worse by the day," Reid said. "When we send the supplemental conference report to President Bush tomorrow, we ask that he take some time to reflect on that somber fact."

Bush said that once he vetoed the bill, he would be ready to work with Democrats on a version that provides funds without strings attached.

"There are a lot of Democrats who understand we need to get the money to the troops," he said.

Democratic congressional aides said they anticipated that Bush would veto the bill tomorrow, before a scheduled bipartisan meeting he plans at the White House with congressional leaders, including Reid and House Speaker Nancy Pelosi (D., Calif.).

Bush said the measure included "artificial timetables for withdrawal. But that's not the only bad thing about the bill. It also imposes the judgment of people in Washington on our military commanders and diplomats. It also adds domestic spending that's unrelated to the war."

On another matter, Bush said Secretary of State Condoleezza Rice might meet with Iranian diplomats later this week while attending a meeting in Egypt on Iraq.

"Should the foreign minister of Iran bump into Condi Rice, Condi won't be rude," Bush said. "She's not a rude person. I'm sure she'll be polite."

The administration in the past has resisted engaging Iran diplomatically on Iraq because of the stalemate over Tehran's uranium-enrichment program. But, in recent days, the administration has signaled more flexibility.

Rice will "also be firm in reminding the representative of the Iranian government that there's a better way forward for the Iranian people than isolation," Bush said.

Tehran insists it is developing nuclear energy to meet electricity demands, not to build weapons.

Bush said U.S. and European leaders were united in backing enforcement of U.N. resolutions on Iran to allow inspections of nuclear facilities.

Bush met with European Commission President Jose Manuel Barroso and German Chancellor Angela Merkel, current president of the European Union.