BERLIN Chancellor Gerhard Schroeder rebuffed criticism on Sunday that Germany was a haven for extremists after suspected suicide hijackers in the U.S. terror attacks were discovered to have lived and studied in Germany.

"It is exceptionally difficult for the police to deal with these people when they act within the boundary of the law," Reuters quoted Schroeder as saying on German television.

"Total protection is impossible in an open society. But we are not helpless or defenseless," Schroeder said.

Germany has become a focal point for investigations into Tuesday's attacks after police said students in the northern city of Hamburg were suspected of taking part in the coordinated suicide hijackings of planes that destroyed New York's World Trade Center and damaged the Pentagon in Washington.

The chancellor said security measures in Germany would be improved but added: "The terrorists must not be allowed to get so far that the very values which we defend against terrorism are put into question."

Schroeder said the government would move to ban extremist religious organizations in Germany at a cabinet meeting on Wednesday.

"Up till now they have avoided a ban under the cover of religious privilege... that privilege must fall."

A Finance Ministry spokesman said on Sunday he could not rule out that the country's debt might have to be increased to Finance new security measures.

Schroeder said he could not rule out the participation of the German army in military action in response to the U.S. attacks but said the government would have to wait and see what Washington requested.

NATO invoked a mutual defense clause for the first time Wednesday opening the way for a possible collective response by the Atlantic Alliance, which includes Germany.

Schroeder, however, said a political response was also needed and said he was pleased that the U.S. had said a wide array of responses were required.

"We must be careful that we don't just talk about a military response. We also need political measures against terrorism worldwide," said Schroeder, adding that a breakthrough in the Middle East was vital.

Foreign Minister Joschka Fischer echoed Schroeder's call for a measured response.

"We need to react but with a cool head. It is not about revenge... the underlying political problems must also be solved," Fischer said on German television.

A poll by German Television Station ZDF showed that 57 percent of Germans supported U.S. military action but only 37 percent were for the German army taking part. 01-18-40.H26 ' '-