Merkel and Cameron's working dinner on Friday evening was a private affair, with the talks continuing on Saturday. The visit is part of Cameron's drive to press for changes in the EU, such as granting member states the right to opt out of some EU laws. His Conservative Party includes a strong euroskeptic wing.

Earlier this year, he announced plans to negotiate a new settlement for Britain and hold a referendum on EU membership by 2017 - if he wins re-election in the mean time - which was met with strong criticism from Germany and France.

"Europe will be more successful if it has the strength of flexibility rather than the weakness of inflexibility," Cameron said earlier this week. "I think the best outcome for Britain is our membership of a reformed European Union."

The British leader is accompanied on the trip with his wife and children, and the family is staying at Meseburg Palace, a guesthouse of the German government, about 70 kilometers (43.5 miles) southwest of Berlin. The trip returns one Merkel took in 2010 to Chequers, the Buckinghamshire retreat of the British prime minister.

It's believed Merkel and Cameron also discussed the ongoing war in Syria, Iran's nuclear program and the upcoming Group of Eight (G8) summit in Northern Ireland, to be held in June.

"Britain is an important and indispensable partner for us in Europe," said a spokeman for Merkel, Steffen Seibert, ahead of the meeting. He said a strong relationship between Merkel and Cameron "matches the close friendship and partnership with Great Britain."

Seibert said Germany was eager to press Britain for action on tax havens around the world. Last week, several Western newspapers published leaked information pointing to offshore accounts held by 130,000 prominent figures around the world.

Many of the tax havens named in the so called "Offshore Leaks" are British sovereign territories.

jr/kms (dpa, AP)