David Cameron attempted to play down tensions with Angela Merkel in a joint press conference on Friday, but the two leaders admitted there had not been any progress on a European-wide financial transaction tax.
"We've had very good discussions between very good friends", the prime minister said. "There are many things where we are in absolute agreement - on the importance of the single market, on the need for budget discipline, on the need for all countries to deal with their debt and their deficit. This is where we are in absolute agreement... we share the same plan."
Merkel is frustrated with Cameron and George Osborne for resisting calls for a Europe-wide financial transaction tax, which the UK say will hit the City of London hardest.
The UK has said it would only support such a tax if it was introduced globally.
On Friday Cameron said it was obvious the two leaders did not "agree on every policy", and Merkel said they had not made any "progress" on the row.
"We have to work on where we both feel change is needed", she told journalists. Cameron said the UK would support a global tax, but did not support a Europe-wide one.
A key ally of the German chancellor, Volker Kauder, said on Tuesday Britain would not be able to resist calls for the 'Robin Hood Tax' , which the European Commission has admitted would cost 500,000 jobs in the UK.
“Now all of a sudden, Europe is speaking German,” Kauder said. “Not as a language, but in its acceptance of the instruments for which Angela Merkel has fought so hard.”
Cameron is desperate to avoid a “two-tier Europe”, where countries within the eurozone make key decisions about the single market.
Yesterday Merkel said Cameron should “examine a stronger involvement with other countries” when the debt crisis abates.
"It was right of David Cameron to concern himself with the UK’s debt issues when he became prime minister — that’s my firm conviction, and once the negative focus has moved away from Europe, he will examine a stronger involvement with other countries."
The meeting came after revelations that Germany has a secret plan to prevent the UK holding a referendum on Europe, according to documents obtained by the Daily Telegraph.
The prime minister was in Berlin to meet the German chancellor, following breakfast talks in Brussels with European Commission president Jose Manuel Barroso and European Council president Herman Van Rompuy.