Merkel and Hollande want Greece to stay in euro

Hollande centred his election campaign around the argument that German-driven austerity alone is not the solution for Europe. He vowed to attach a "growth pact" to the Berlin-inspired fiscal treaty enshrining budgetary discipline in national law.

He repeated that stance on Tuesday: "I said it during my election campaign and I say it again now as president that I want to renegotiate what has been agreed to include a growth dimension."

The two leaders agreed to table joint proposals ahead of an EU summit at the end of June. The meeting excited high interest as both the media and markets were keen to see how Merkel and Hollande would manage their differences on growth measures.

These have been exacerbated by the fact that both come from different political families and Merkel openly supported her centre-right colleague Nicolas Sarkozy during the French election campaign.

Merkel played down the differences however and joked about the fact that Hollande's plane had been struck by lightening on the way to Berlin.

"Perhaps it's a good omen for Franco-German co-operation," said the chancellor.

Greece was however an area where they both agreed: "Like Ms Merkel, I want Greece to remain in the eurozone," Hollande said.

Markets tumbled on Tuesday on the news that coalition talks failed in Athens, paving the way for new elections in June and with the prospect of the anti-bail-out camp emerging even stronger from the second vote.

Adding to a chorus of politicians and bankers who in recent weeks have spoken about Greece leaving the eurozone, International Monetary Fund chief Christine Lagarde said that the scenario may have to be considered.

"If the country's budgetary commitments are not honoured, there are appropriate revisions to do, which means either supplementary financing and additional time or mechanisms for an exit, which in this case must be an orderly exit," she told France 24.

"It is something that would be extremely expensive and would pose great risks but it is part of options that we must technically consider," she said.