British Prime Minister David Cameron and German Chancellor Angela Merkel pledged Friday to work together despite deep differences over how to proceed with European Union integration and how to deal with the euro zone debt crisis.

Meeting in Berlin, the two leaders also said they would come together to stop big rises in the EU's 2012 own budget.

"Whenever David and I have worked together on a problem, we've found a solution," Merkel said, as cited by DPA, as the two leaders emerged from talks at her office on a raging row over German demands for a tax on financial transactions and for changes in European treaties.

"We will be working together to find a shared solution before the (EU) summit on December 9," Merkel told a joint news conference.

"We had a discussion about the treaties ... Germany has her interests and so does Britain,' Cameron said. 'We agreed to work together to achieve our respective interests ... in the run-up to the European Council."

"The chancellor and I have agreed ... that we need to take decisive action to stabilize the euro zone," declared the British PM.

Merkel gave no sign of backing down on her demand for Brussels to be given more powers to punish euro zone nations that breach deficit limits.

"I made clear that we need more ... powers of discipline for the European institutions and that this is possible with limited treaty changes," she said.

Cameron criticized Germany's calls for a tax on financial transactions in the eurozone alone, saying it had to be "global" to work.

On the EU budget, both agreed that any increases should be linked to the rate of inflation.

"It is not acceptable, as the European Parliament has suggested, for some 5% increases at a time when every country in Europe has to make difficult budget reductions."

While the meeting was dominated by EU issues, Merkel also voiced pessimism about Iran's stance in the ongoing nuclear dispute.

"We are gloomy about the situation in Iran and the Iranian nuclear program. That is why we advocate more sanctions," she said.

Ahead of his visit to Berlin, Cameron travelled to Brussels, where he joined the European Commission in calling for decisive action to ensure the stability of the euro and stimulate economic growth.

A statement released in Brussels following his talks with European Union Commission President Jose Manuel Barroso also stressed the importance of further developing the single market in Europe.

"President Barroso and Prime Minister Cameron agreed on the importance of prioritizing the decisive action needed to ensure the stability of the euro area as well as fast-tracking measures to stimulate growth and jobs," it said.

Cameron also raised British fears about the development of an "inner core" of euro zone countries within the 27-member EU that could leave Britain on the margins, reports on the breakfast meeting said.

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