By Stephen Brown
BERLIN (Reuters) - German Chancellor Angela Merkel may not have a "bosom friendship" with her French counterpart, she said on Thursday, but her working relationship with Francois Hollande was strong and crucial for Europe.
With her foreign minister saying Germany must not act with "Teutonic arrogance" towards its euro zone neighbors, Merkel played down criticism she has received from France's ruling Socialists.
"Living in an open society we must have nuances between conflict and bosom friendship. It seems there is nothing between the two - but the reality is different," Merkel told a conference on Europe in Berlin.
Hollande's party last month called Merkel's leadership in the euro zone crisis "self-centered" in a text - later amended - which revealed the depth of hostility in France provoked by her drive for fiscal austerity.
Germany's ruling conservatives have offered steady criticisms of Hollande's inability to reduce the public deficit.
But Merkel told an audience of politicians and diplomats she had "a good personal relationship" with Hollande and that relations between Europe's two biggest economies "stand on very strong foundations".
Her close partnership with Hollande's conservative predecessor Nicolas Sarkozy, which led to the pair being dubbed "Merkozy", was a hard act to follow.
But Luxembourg Prime Minister Jean-Claude Juncker, who until recently ran summits of the 17 euro zone states, said media reports about hostile body language between Merkel and Hollande were "laughable".
One year into his term, Hollande's approval ratings are among the worst for a post-World War Two leader, while Merkel polls around 60 percent and is likely to win a third term in a September election.
While Merkel may not sympathize with his Socialist politics, she knows that the stability of Germany and the euro zone depends on Hollande's success.
Merkel said that she and Finance Minister Wolfgang Schaeuble were both "very optimistic" that France would strike the right balance between consolidating its budget and encouraging growth.
"We will not criticize France openly," Schaeuble told the conference. "We know that France can do and does do many things better than Germany."
Germany had to avoid acting like a "know-it-all" when giving France advice, he said. Foreign Minister Guido Westerwelle said Germany must beware of acting with "Teutonic arrogance".
Merkel, who spoke straight after Britain's Minister for Europe David Lidington, said she was too busy to worry what happens if Prime Minister David Cameron's promised referendum on European Union membership results in a British exit.
She emphasized all she had in common with Cameron on issues like free trade and making the EU more efficient, joking: "When I find anyone like-minded in Europe, I take what I can get."
(Additional reporting by Annika Breidthardt and Andreas Rinke; Editing by Robin Pomeroy)