Hollande says Germany and France must work together

President Francois Hollande said Wednesday France and Germany must work together whatever "sensitivities" may arise, as the two neighbours struggle to see eye-to-eye over belt-tightening policies.

The French leader and his German counterpart Angela Merkel have had trouble finding common ground over austerity policies championed by Berlin that are causing growing resentment in the EU.

That ideological rift came to broad daylight on Friday when Hollande's Socialist Party branded Merkel an "austerity chancellor" and accused her of "selfish intransigence" in a leaked document.

France and Germany must "work together whatever the situation, whoever the individuals who manage it are and whatever the sensitivities," Hollande told reporters after talks with Italy's new Prime Minister Enrico Letta.

Letta took office earlier this week after a two-month stalemate following Italy's inconclusive February election, and in a hard-hitting inaugural speech, he said Italy was "dying from austerity alone."

He has promised to focus on measures to kickstart an economy that shrank by seven percent in the five years up to 2012 and is forecast to contract by a further 1.3 percent this year.

Speaking at the press briefing, he nevertheless said his country would stick to budget promises made to the European Union, and called for the prompt establishment of a single European banking union to facilitate growth.

EU leaders in December agreed in principle on a banking union with its first component, a single supervisory mechanism, to begin from March 2014.

The two other pillars of the banking union will include a bank deposit guarantee scheme and the establishment of a mechanism for dismantling failed banks.

"The banking union... is there, we decided on it, we must set it up, we must not lose any time in doing so," he said.