BERLIN - German Chancellor Angela Merkel and British Prime Minister David Cameron held talks on Saturday on the European reform and agreed to work together to make the European Union more competitive and flexible.

"They agreed on the urgent need to make Europe more competitive and flexible and talked about ways to achieve this," Downing Street said in a statement.

The statement said Cameron set out his approach to the European reform, following on from his speech in January when he promised that if he wins the 2015 election he will negotiate a new relationship with the EU and give British people an in-out choice through a referendum.

In response, Merkel has said Germany was ready to discuss with Britain over its wishes on the EU and help find a compromise to stop a British exit.

During their meeting on Saturday, the two leaders also agreed to show "global leadership" in tackling tax evasion and tax avoidance. International issues such as the situation in Syria and the upcoming G8 summit under the British presidency were also discussed.

The meeting was held at Merkel's government guest residence in Meseburg, outside Berlin. Cameron's wife Samantha and their three children were also invited.