Merkel, Cameron struggle to stress unity on Europe

German Chancellor Angela Merkel and British Prime Minister David Cameron strained Friday to stress their unity on tacklingEurope's spiralling debt crisis but differed sharply on key points.

After tensions flared in the run up to their talks in Berlin, the two conservative leaders put a brave face on their differences but failed to make headway on crucial issues such as the role of the European Central Bank (ECB).

Cameron renewed his appeal for all eurozone institutions to do their utmost to rescue the common currency, in response to a question about his call for the ECB to be used as a "big bazooka" for the euro.

"As we agreed at the G20, all the institutions of the eurozone have to stand behind and back the currency and do what's necessary to defend it -- that is what needs to happen," Cameron told a joint press conference.

But Merkel underlined her opposition to the ECB buying up bonds on a major scale and becoming the lender of last resort to debt-mired countries.

"You have to be careful not to pretend to have powers that you do not," she said, following remarks she made this week that the ECB would not have the right to take such action under existing rules.

"The markets will catch on quickly that that will not work."

New ECB chief Mario Draghi Friday also brushed off the political pressure, saying the bank's overriding task was to safeguard price stability and that governments must put their finances in order to buck the crisis.

Cameron and Merkel also differed on a financial transaction tax (FTT), which he reiterated Britain could only accept if it were introduced on a global scale.

Britain fears such a tax for the EU would drive banks out of the City of London, Europe's top financial centre and a major revenue contributor.

Merkel has said she would be willing to press forward on the tax in the 17-member eurozone alone if the 27 EU members could not agree on it. Britain belongs to the EU but not the eurozone.

"Both our countries would introduce (the FTT) immediately on a global level but we did not make any progress on the European level," she said.

Cameron nevertheless stressed his confidence in the eurozone's ability to find its way out of its debt crisis and said Britain had a key stake in the euro's success.

"This is obviously a difficult time -- you can see that in the markets -- but I don't underestimate for a minute the commitment of countries like Germany and those in the eurozone to make the currency work," he said.

"And that is what is in Britain's interest and that is what we would like to see happen."

He added: "It is obvious that we don't agree on every aspect of European policy, but I am clear that we can address and accommodate and deal with those differences."

Merkel also turned on the charm after a trying week, saying that she was confident they would strike a compromise.

"Whenever David and I work together on a problem, we have always found a solution," she said.

Cameron, arriving after talks with EU leaders in Brussels, and Merkel have clashed recently on the way forward for Europe as it suffers what she 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 eurosceptic line of late in response to domestic pressure.

Merkel stressed at the press conference that she was seeking "limited treaty change" only for eurozone members to impose more fiscal discipline as a means of winning back investors' confidence "step by step".

The opposing views could put the two camps on a collision course ahead of a December 9 EU summit which may step up the role of Brussels in enforcing economic discipline among eurozone nations.

The proposals could trigger the need to tweak the EU's rule-book, the Lisbon Treaty, and a commission official confirmed that treaty change was on the menu at talks Cameron held earlier Friday with commission chief Jose Manuel Barroso.

On that issue, Cameron's message "was let's solve the crisis first," an EU diplomat said.