David Cameron, the British prime minister, has said that he and German Chancellor Angela Merkel have agreed on the need for "decisive action" to resolve the eurozone debt crisis, following talks in Berlin.
Merkel and Cameron downplayed differences between Germany, the eurozone's biggest economy, and non-eurozone member Britain, in a news conference after Friday's discussions.
Cameron said the two leaders agreed that "we need to take decisive action to help stabilize the eurozone". He acknowledged that the two countries have differences but said that they can "deal with" them.
Merkel highlighted the two countries' common interest in getting public finances in order and ensuring that a European Union budget increase is kept in check.
But there was no sign of progress on differences over Germany's wish for a financial transaction tax in Europe.
Merkel and Cameron have clashed recently on the way forward for Europe as it suffers what the chancellor has called perhaps its most difficult hour since World War II.
While Merkel sees "more Europe" as the solution, with member states agreeing to cede more sovereignty on issues such as fiscal policy, Cameron has taken a hard Euro-sceptic line of late in response to domestic pressure.
The opposing views were threatening to put the two camps on a collision course ahead of a December 9 EU summit to hammer out changes to the fiscal rule book for the 27-member bloc.
Berlin has accused London of being selfish about Europe as the UK are against an idea of a financial transactions tax, described by one UK minister as a "tax on Britain".
Cameron restated his opposition to a Franco-German proposal for the so-called Tobin tax on financial transactions,
which Britain believes would have a withering effect on its financial sector.
The idea, also backed by France's President Nicolas Sarkozy, has caused alarm in the UK amid concerns that the US, China and other major economies may not come on board, and the City of London would be seriously damaged if the tax is only applied across Europe.
Prior to the talks in Berlin, The Financial Times reported that Cameron would be prepared to back Merkel's plans to strengthen economic union in the eurozone, on condition he wins safeguards to protect the UK from any European legislation.
In the wake over the eurozone crisis, Merkel is prescribing altering the EU treaty to impose German-style budget discipline, preferably on all 27 members of the EU, rather than just the 17 countries in the eurozone.
Peter Altmaier, chief whip of Merkel's Christian Democratic Union (CDU) in the Bundestag, told the Reuters news agency that "plans for a possible treaty change are now at a very interesting point and we expect to exchange views with our British partners".
However, treaty change talk seems to irritate Cameron's conservative-led coalition for two reasons: it falls far short
of the "big bazooka" response he urges; and it touches a raw nerve about ceding more sovereignty to the European Commission in Brussels.
Britain is already worried that Germany's proposals for a tax on financial transactions - which it still wants introduced in Europe despite rejection by the Group of 20 leading economies would hurt London's competitiveness as a financial hub.
This prompted Merkel's parliamentary leader, Volker Kauder, to tell the CDU at a conference in Leipzig that Germany would not accept Britain "only defending its own interests" and especially those of the City of London's financiers.
Speaking earlier this week, Merkel said the EU needed more powers to ensure budget discipline among member states and Germany was willing to give up sovereignty in some areas to facilitate this.
In contrast, Cameron is pushing for the UK to take powers back from Brussels in pursuit of what he says is his goal of a more flexible and diverse Europe.
In the event of eurozone members moving closer together, the UK has said it wants safeguards that those outside the single currency area will not be disadvantaged in terms of access to the single market and regulations on key sectors like finance.