Angela Merkel told journalists at the G8 summit in Toronto, Canada there was "mutual understanding" with President Barack Obama over deficit reduction plans.

Leaders are attending summits of the G8 and G20 groups of leading states.

Mr. Obama is worried that a series of deep budget cuts announced by European countries may delay global recovery.

But on Friday, after an initial meeting of the G8 - US, Canada, Germany, UK, France, Italy, Russia, Japan - Mrs Merkel said there was much common ground.

President Obama voiced his concerns about the speed of budget cuts in a letter to G20 leaders last week, while Treasury Secretary Timothy Geithner said that Europe should focus on growth as well as cutting spending.