By Katherine Baldwin

ISLAMABAD, July 26 (Reuters) - Britain will work with Pakistan to fight militants on the Afghan border, Foreign Secretary David Miliband said on Thursday, noting all sides must work more effectively in the struggle.

U.S. officials say al Qaeda is regrouping in Pakistan and have not ruled out direct strikes inside Pakistani territory -- a stance that has provoked a heated reaction in Islamabad.

"We've got a strong partnership with the government of Pakistan on counter-terrorism measures," Miliband told Reuters as he wound up a visit to Afghanistan and Pakistan.

"Our determination is to work with the government of Pakistan," he said. He refused to "get into ruling in or out hypotheticals" and said his words should speak for themselves.

But Miliband said Pakistan, Afghanistan and Britain, as well as other allies, needed to step up counter-terrorism efforts.

"We all want to do more. We've all got to make sure our combined efforts achieve as much as possible," he said.

He steered clear of criticising Afghan President Hamid Karzai or Pakistani leader Pervez Musharraf for not doing enough on terrorism, adding he had listened rather than lectured on his first trip outside Europe since Prime Minister Gordon Brown named him foreign secretary last month.

Miliband, 42, met Karzai, British troops, civilian officials and Musharraf during his tour of the countries that began on Tuesday.

JOINT SECURITY

"The only solution is a joint security, economic, social policy -- social change and security together -- and the only solution is to work jointly because its a difficult border region," he said in an interview at the British High Commission's residence.

He added there was a need for "collaboration and responsibility across the border," where clashes between Pakistani soldiers have increased in past weeks.

Miliband declined to comment on relations between Karzai and Musharraf, which have been fractious for years, but he said a meeting of tribal elders from both countries on Aug. 10 -- known as a grand jerga -- had to be a good thing.

Asked about a possible power-sharing deal between former leader Benazir Bhutto and Musharraf, Miliband refused to stray into internal Pakistani politics but he said Britain obviously backed a "moderate" political path in Pakistan.

"Of course we think that what I think is called 'enlightened moderation' here is a sensible way forward but equally we've got to respect the democratic processes that do exist for legislative elections," Miliband said.

Musharraf hopes to be re-elected by the current assemblies in September or October, and is constitutionally obliged to give up his role as army chief by year-end. Parliamentary elections are expected by December or January.

Miliband added that Britain's position on free and fair elections was well known.

Viewed by some analysts as a sign Brown wants a shift in Britain's foreign policy after a decade of Blair, Miliband said Brown's government wanted to build on the foundations laid by Blair while being flexible in changing circumstances.

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