While acknowledging a warm atmosphere at their first meeting since Angela Merkel became chancellor, neither the German leader nor British Prime Minister Tony Blair indicated any progress on the current European Union budget stalemate after talks Thursday held at 10 Downing Street.

At a joint press conference, both leaders sidestepped whether any progress at all had been made on the pressing issue of the dispute over the European Union budget.

Britain currently holds the rotating presidency of EU and would like to hammer out an agreement by the end of this year, but that looks increasingly unlikely.

Tony Blair maintains that Britain would only consider relinquishing its substantially European rebate if the entire EU budget - including large agriculture subsidies to countries like France are considered as well.

Having already visited President Chirac on Wednesday and given Germany's close European relationship with France, which side of the argument would Angela Merkel come down on? Her answer was extremely diplomatically.

"I want to have success and the situation of each country has to be taken into account," she said. "If anybody forgets one country with one of its interests, then you will not get any success."

For his part, Mr. Blair did not signal any change in his position but he did says the European Union, especially now with 25 member states, must work more closely together where everyone benefits.

"The whole point about the European Union is that we benefit if we are working together," he said. "And these challenges of economic change, it is in Britain's interests that Europeans meet them together because then the British economy is stronger and the standard of living of British people is higher. So, you know, over the years this has been a familiar argument which is to try and force all countries into choices about who they have as partners and who they do not. It genuinely should not be like that that. "

Asked if she saw herself as a role model for German women, Chancellor Merkel said she would like to see more women in higher positions in industry and would also be pushing for more childcare benefits for working women.

"Income transfer will be enacted so that women who earn more can get support and secondly, better child-care possibilities and we will put the family of the household within legislation so that social benefits will be anchored within the place of work," she said.

Earlier in her trip, Ms Merkel called for closer German ties with the U.S. but she stressed she would stick with the current policy of keeping German troops out of Iraq.

Her new foreign minister will hold talks next week with U.N. Secretary-General Kofi Annan in New York before heading to the Washington for talks with top administration officials.