Speaking to the press after talks in Ljubljana on Tuesday, Merkel and Pahor said they talked about problems in the euro zone and structural reforms aimed at increasing competitiveness and stabilising the joint European currency, as well as about Europe's role in the world, confirming they also talked about the Western Balkans and the European prospects of all countries in the region.

Responding to questions from the press, Merkel said she did not want to send messages to Serbian President Boris Tadic from Ljubljana, but indicated that she stuck by her messages that Serbia had to settle relations with Kosovo before joining the European Union. Last week, she visited Zagreb and then Belgrade.

The countries in the region must solve their conflicts bilaterally, so as not to bring them to Europe, Merkel said, adding that Croatia and Slovenia had shown how to solve outstanding issues, showing great courage by solving their border dispute through dialogue and compromise.

She said bilateral problems between the countries in the region could surface in the future as well, about borders or states's names, for example, so they should be solved.

Merkel pointed to the positive role Pahor and Croatian PM Jadranka Kosor had played in the settlement of the border dispute.

Asked if Slovenia and its PM, who held talks with Tadic after Merkel's visit to Belgrade, could play a key role in calming the situation in the region, Merkel said Slovenia could play a role in the region because it was a member of the EU and because it had shown courage, together with Croatia, by adopting a difficult decision on how to solve a bilateral dispute.

The settlement of the Slovenian-Croatian dispute took two years, but it paid off, said Merkel.

Pahor said he spoke with Tadic on Saturday and came to an idea about solving the Belgrade-Pristina conflict in light of Serbia's EU integration, adding that he briefed the US and Germany about it.

Pahor said he would meet with Kosovo PM Hashim Thaci if he was interested, to give a new impetus to Belgrade-Pristina dialogue.

He said it was possible to solve disputes in a more sophisticated fashion and to ensure peace and a way out of "this awkward situation."

Pahor commended Tadic for his recent "conciliatory" statement after Zagreb-Belgrade relations became strained over some statements made by Tadic and Kosor.

Merkel supported Pahor's wish that Slovenia, by carrying out the necessary reforms, should stay in the healthy zone of EU countries which do not have major public debt and budget deficit problems.

Slovenia is a reliable partner in the EU and Prime Minister Pahor is 100 per cent-committed to the European idea, she said in response to the question if Slovenia could be a credible partner to the French-German train of necessary reforms, given that Slovenians had turned down some reforms moved by Pahor.

We all need reforms, including Slovenia. Everyone has to do their homework, said Merkel.

Pahor said the German-Slovenian declaration signed during Merkel's visit spoke about the need to further strengthen and upgrade political and economic relations, notably in investments.

Germany is a very important trade partner for Slovenia and the trade, which declined 20 per cent two years ago due to the global crisis, is on the rise again, said Pahor.