"Mediocrity must not become the standard," Merkel told members of Germany's federation of family-run businesses
Germany's Angela Merkel stood firm against growth quick fixes to Europe's crisis Friday and France rushed to reassure her she would not be sidelined as the clock ticked down on a fateful Greek vote.
Merkel insisted that hasty proposals such as eurobonds, backed by France, for pooling debt in Europe, would result in "mediocrity," while Paris fought perceptions of a rift with Berlin insisting the two should work "hand-in-hand."
Europe's debt crisis can only be addressed by tackling its root causes -- debt and uneven competitiveness -- Merkel said, warning that proposals to mutualise debt or risk merely papered over the divergences between countries.
"Whoever masks that ends up in mediocrity. Mediocrity must not become the standard," Merkel warned to applause, addressing members of Germany's federation of family-run businesses.
And she complained that pitting the idea of growth against budgetary rigour in the debate over how to steer Europe out of its more than two-year-long debt crisis was "simply rubbish" as she strongly backed both principles.
With the threat of a Greek euro exit hanging over Sunday's poll and global leaders heading to Mexico for a G20 summit from Monday, Merkel faces pressure for Europe's de facto paymaster to forge a solution.
But she is also under fire over her unwavering stance on strict budget consolidation as the way to tackle the turmoil, especially since Berlin's key EU ally, France, has pushed for a growth-led strategy under its new president.
French Prime Minister Jean-Marc Ayrault however seemed at pains Friday to cool any perception of sidelining Merkel, telling Europe 1 radio this was "absolutely not" the case and would be "a bad route."
France and Germany should work "hand-in-hand for a solution to pull Europe out of crisis," he said, a day after urging Germany not to "let itself go with simplistic formulas."
An Elysee source said however that regardless of what was said, a "real convergence" existed between Paris and Berlin. "The Germans support reaching an agreement with ambitious results" at an end-of-June EU summit, the source added.
European G20 leaders held a video conference Friday, in which they agreed on the need to "secure global economic stability and to support growth", Britain said Friday.
Prime Ministers David Cameron of Britain, Mario Monti of Italy and Mariano Rajoy of Spain took part in the call with Merkel and French President Francois Hollande, a spokeswoman for Cameron said.
European Commission President Jose Manuel Barroso and European Council President Herman Van Rompuy also participated in the conference, which was intended to serve as a coordination meeting before Monday's G20 summit.
Stocks around the world rallied despite uncertainty over Greece as investors appeared to bet on fresh stimulus from the United States and Europe to boost growth and fight the eurozone crisis.
Meanwhile, German central bank chief Jens Weidmann stirred a debate on the strings attached to Spain's June 9 deal for up to 100 billion euros ($125 billion) to save stricken banks.
Madrid should face "broad" conditions, not just conditions on its financial sector, in exchange for the aid, he told Friday's El Pais daily, warning that questions about the deal's terms were "eroding" commitment by other bailed-out eurozone nations to the terms of their accords.
Later the International Monetary Fund warned that Spain was likely to miss its 2012 deficit target and urged a "comprehensive" reform package.
Greece, which along with Portugal and Ireland has received an international credit lifeline, returns to the polls Sunday for its second election in six weeks.
The vote will be watched closely around the world as all the top candidates are now calling for renegotiation of Greece's bailout deal despite warnings that the country must toe the line or leave the euro.
European leaders, in particular Merkel, have said the terms must stand but officials say privately there is some wiggle room and a willingness to meet Greece's need to restart economic growth after five years of recession.
"The terms of the compromise, which is to be signed between now and September, would add another two years on the target for fiscal consolidation," a former adviser to former prime minister Lucas Papademos told AFP on condition of anonymity.
Greece, which is currently on its second international bailout loan of 130 billion euros ($164 billion), conducted a 107-billion-euro private debt write-off earlier this year.
And Italy, struggling to allay fears over its debt, adopted a series of growth-boosting measures along with plans to sell off state assets and trim the number of government workers.
Europe's main stock markets pushed higher at Friday's close, with London's benchmark FTSE 100 adding 0.22 percent and Frankfurt's DAX 30 up 1.48 percent, while in Paris the CAC 40 climbed 1.82 percent.