Prime Minister David Cameron and German Chancellor Angela Merkel agreed on Thursday that the EU's fiscal pact was not a sufficient step in itself to resolve the crippling eurozone debt crisis.
In a short news conference after talks in Berlin, Merkel also reiterated that Germany would back the use of instruments already established in Europe to tackle the crisis and was determined to keep the eurozone stable.
The German-inspired fiscal pact, which aims to toughen budgetary discipline in the EU, was "necessary but not the only precondition" to stem more than two years of turbulence, Merkel told reporters.
For his part, Cameron added that the fiscal pact, which non-euro Britain has not signed, was "important but not sufficient" to pull the eurozone out of its malaise.
"There are other things that the eurozone will have to do to make the single currency work properly," Cameron said.
Merkel said that when it came to dealing with what she called the "acute" phase of the crisis, it was "important to stress that we have created instruments for support in the eurozone and that Germany is ready to use these if needed."
Under fire from all sides to do more to stem the debt crisis, the chancellor emphasised her determination "to keep the eurozone stable so that the eurozone can make its contribution to global growth."
Cameron repeated his insistence that "when it comes to the eurozone crisis, I'm very clear that urgent action is needed to deal with the market uncertainty, that is about building firewalls and recapitalising banks."
Looking further out, Merkel said that the countries that shared the single currency would need to pool sovereignty in areas other than taxing and spending if such crises were to be prevented from happening again.
"When we look at the medium and longer term, we need more coherence, not just in terms of fiscal policy, but also in other areas... (the fiscal pact) is a necessary step, but not sufficient," she added.
Twenty-five of the European Union's 27 member states have signed on to the fiscal pact.
Merkel added that she wanted to see "certain parameters" within the eurozone harmonised.
"For example, when one country spends nothing on research and another spends three percent of its gross domestic product, that cannot work in the long term," the chancellor said.
"The responsibility of being in a common currency brings other duties with it. This is shown in the fiscal pact but it does not call into question the togetherness of the whole EU 27," she insisted.
But both leaders dismissed suggestions that greater eurozone integration would result in a de facto two-speed Europe.
Citing the examples of Britain and Denmark, which have decided not to join the euro, Merkel said: "We have always had in Europe different forms of integration... we can live with a Europe where countries do not go at the same pace."
Cameron said: "I have no doubt that the single currency countries will want to seek greater integration. That is clearly going to happen over the coming months and years."
"Britain is not in the single currency, we won't be joining the single currency, so we won't take part in that integration," added the prime minister."
"But we know it's necessary for the single currency to deal with these issues so it can work properly in the future," he said.
One example of integration under discussion was a "banking union", which Cameron stressed Britain would also not be joining.
He said he "wouldn't want to ask British taxpayers to guarantee deposits of Spanish and Greek banks."
He also reiterated London's firm rejection of a financial transaction tax amid reports that the German coalition had clinched a deal with the opposition on Germany's negotiating position on the disputed levy.
"But the idea of a tax across Europe on transactions, I think, would simply drive those transactions offshore to other places and would cost jobs and is not the right approach," said the prime minister.
Merkel said she could not confirm or deny the reports of a deal.