Referring to her phone conversation with the Greek premier on Thursday, Merkel said she was able to determine the depth of Papandreou's commitment to ensuring that Greece met its obligations and the way he was fighting so that Greece might follow the right path.
"It would be good if the main opposition supported the Greek prime minister," she added, criticising the stance displayed by Greece's New Democracy party and its dogged refusal to open the way to a broader consensus on the austerity measures.
Sarkozy also hailed the efforts of the Greek government and urged it to continue reforms and privatisations.
The two leaders said that the French and German governments were currently waiting for EU-IMF troika inspectors to complete a detailed report that would cover not just political issues but also very technical matters concerning the size of the adjustment programme and technicalities concerning its implementation.
The French president further underlined the strong commitment of France and Germany to the stability of the euro, which he said could not be improved on.
"We both support the euro with all our strength," he stressed.
Merkel made it clear, however, that release of a new support package for Greece would be conditional on the country approving the Medium-Term Fiscal Strategy.
"The Greek Parliament must pass the necessary measures," Merkel stressed.
In other statements, Merkel indicated a softening of Germany's stance to the involvement of private investors in a Greek rescue, aligning herself with calls from France and the European Central Bank (ECB) that their participation should be strictly voluntary in order to avoid triggering a sovereign default.
She indicated that EU leaders were considering a rollover along the lines of a Vienna Initiative, where proceeds from maturing bonds were reinvested in new securities, thus buying time for Greece until its austerity programme begins to yield results or a permanent bailout mechanism goes into operation in mid-2013.