German leader Angela Merkel held talks with her Canadian counterpart on a first-ever bilateral visit shadowed by eurozone fears and Ottawa's refusal to wade into relief efforts.
The delegation was all smiles as Prime Minister Stephen Harper whisked Merkel away to his lakeside retreat for an informal dinner ahead of talks on the debt crisis and efforts to reach an EU-Canada free trade pact.
They appeared cheerful and animated as they made small talk and gazed across the still waters at the sun setting behind a lush forest during the two-hour dinner at the Harrington Lake retreat.
Merkel had arrived with five German business leaders who were to be joined by counterparts from five Canadian firms during a business luncheon Thursday with Merkel and Harper.The two leaders "have a close, trusting relationship," a senior Merkel aide said.
But they remain split on how to tackle the European debt crisis.
While Germany has helped backstop struggling eurozone nations, Canada and the United States are the only G8 members to not contribute to a bailout stash through the International Monetary Fund.Ahead of Merkel's arrival, Finance Minister Jim Flaherty said that Canada would not reconsider contributing to the fund to help ailing Greece, Spain and Italy.
"It's not necessary for Canada to use Canadian resources to help solve the European problem, given that the European countries are among the wealthiest in the world," he told reporters.
"Not enough has been done. They need to do much more."
Flaherty also warned that "continuing economic headwinds from outside the country could easily throw us off course," hinting at Europe's debt woes.
Germany is Canada's eighth-largest export market, and Germany ranks fifth among Canada's suppliers.
The two countries hope to grow bilateral trade through a Canada-EU free trade pact scheduled to be finalized by year's end.
But there are stumbling blocks in the talks involving intellectual property, public procurement and aspects of the services sector -- all likely to feature in Merkel and Harper's discussions.
Canada's provinces and municipalities have also expressed concerns about losing their ability to extend preferences to local suppliers.
A deal with the 27-nation European Union would be Canada's second-largest free trade pact after the 1994 North American Free Trade Agreement with the United States and Mexico, and the first to include access to municipal procurements.
Environmentalists, farmers, auto workers and others have rallied against the deal.
A formal meeting in Harper's office is set for early Thursday, followed by a joint press conference and the business luncheon.
Later Thursday, Merkel will travel to Halifax in easternmost Canada to discuss oceanography with scientists at Dalhousie University's Marine Research Institute.
Harper is the second-longest serving leader in the G8, after Merkel. The chancellor was last in Canada to attend the June 2010 G8 and G20 summits.