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Germany balks at Tillerson call for more European NATO spending

* Germany's Gabriel says NATO spending target not reachable

* Tillerson: May summit must produce more European spending

* Tillerson says Russia sanctions to remain

* NATO head says trans-Atlantic bond "rock solid"

* Europeans' doubts linger over Trump commitment to NATO (Adds Tillerson remarks on Russian sanctions)

By Lesley Wroughton and Robert-Jan Bartunek

BRUSSELS, March 31 (Reuters) - U.S. Secretary of State Rex Tillerson reassured his nervous European counterparts over Washington's commitment to NATO on Friday and pressed them again to spend more on defence, triggering a rebuke from Germany.

Foreign Minister Sigmar Gabriel said it was neither "reachable nor desirable" for Germany to spend the agreed NATO target of two percent of member states' economic output on defence. NATO allies have until 2024 to do that.

"Two percent would mean military expenses of some 70 billion euros. I don't know any German politician who would claim that is reachable nor desirable," Gabriel told the first meeting of NATO foreign ministers attended by Tillerson.

"The United States will realise it is better to talk about better spending instead of more spending," he said, noting that humanitarian, development and economic aid to stabilise countries and regions should also count.

In his first remarks to NATO ministers, Tillerson said allies needed to pay up or outline plans for meeting that target when NATO leaders meet on May 25 for the first top-level summit of the alliance to be attended by U.S. President Donald Trump.

Trump has criticised NATO as "obsolete" and suggested Washington's security guarantees for European allies could be conditional on them spending more on their own defence. He has also said he wants NATO to do more to fight terrorism.

"Our goal should be to agree at the May leaders meeting that by the end of the year all allies will have either met the pledge guidelines or will have developed plans that clearly articulate how...the pledge will be fulfilled," Tillerson said.

"Allies must demonstrate by their actions that they share U.S. government's commitment."

In Berlin, German government spokesman, Steffen Seibert, said the government was committed to increasing defence spending and would continue to do so "because we know it is necessary and makes sense to further strengthen our armed forces".

U.S. defence expenditure makes up about 70 percent of the total NATO allies' defence spending. Only four European NATO members - Estonia, Greece, Poland and Britain - meet the two-percent target.

NATO head Jens Stoltenberg rejected Gabriel's call to include non-military spending towards the goal, but said Germany was moving "in the right direction" with more military spending after years of cuts.

He said NATO ministers on Friday discussed national plans for arriving at the target as they prepared for the May summit.

In London, Britain's Defence Secretary Michael Fallon said that other European NATO allies must "raise their game, and those failing to meet the two-percent commitment... should at least agree to year-on-year real terms increases."


QUESTIONS OVER U.S. COMMITMENT

Tillerson did, however, offer assurances of Washington's commitment to NATO during his brief stop in Brussels, where he did not hold one-on-one meetings with countries, which is customary during such gatherings.

His initial decision to skip his first meeting with NATO foreign ministers had added to questions about the Trump administration's commitment. The meeting was later rescheduled and he attended on Friday.

"The United States is committed to ensuring NATO has the capabilities to support our collective defence," Tillerson said. "We will uphold the agreements we have made to defend our allies."

Tillerson said NATO was fundamental to countering Russian aggression in Ukraine and said the United States would hold Moscow accountable to its commitments under a two-year Minsk ceasefire deal. He pledged to keep sanctions in place against Moscow until it complies with the Minsk agreement.

Trump has said in the past that, as part of a rapprochement he is seeking with Russia, he is prepared to review the sanctions, which were imposed by Barack Obama over Russia's 2014 annexation of Ukraine's Crimea Peninsula.

"We do not, and will not, accept Russian efforts to change the borders of territory of Ukraine," Tillerson said according to a transcript of his remarks.

"The United States sanctions will remain until Moscow reverses the actions that triggered our sanctions," he added, expressing alarm at a surge in violence along the front lines in eastern Ukraine.

Stoltenberg said ties between European NATO members and the United States were "rock solid".

He said "fair burden sharing to keep the trans-atlantic bond strong" and "stepping up NATO efforts to project stability and fight terrorism" were on the agenda on Friday as the bloc seeks to respond to the new, harsher tone from across the Atlantic. (Additional reporting by Tom Koerkemeier in Brussels, Andrea Shalal in Berlin and Kylie MacLellan in London; Writing by Gabriela Baczynska; Editing by Louise Ireland and Mary Milliken)