Europe and the United States tried to bridge differences over how to sustain fragile global economic recovery and sought common ground on dealing with ballooning deficits.

Canada's Prime Minister Stephen Harper (L) welcomes Japanese Prime Minister Naoto Kan at the G8 Summit in Huntsville, Ontario, June 25, 2010. REUTERS/Eric Feferberg/Pool

As the G8 summit of the world's major developed economies got underway in Canada, all eyes were on a potential clash between European leaders bent on slashing spending and a Washington fearful of stifling growth.

Germany's Chancellor Angela Merkel showed her hand early, insisting members must move fast to cut soaring public deficits and ensure financial stability.

But both she and US officials stressed this did not represent a split with the United States, and said both European and other G8 powers were looking for a balance between debt reduction and support for growth.

"I have made it clear that we need sustainable growth and that growth and intelligent austerity measures don't have to be contradictions," Merkel said.

"The discussion was not controversial, there was a lot of mutual understanding," she told journalists after the first exchanges of the summit in an exclusive lakeside resort north of the Canadian city of Toronto.

A senior US official, speaking on condition of anonymity, confirmed the meeting had gone well and that Merkel and US President Barack Obama had not fallen out over Germany's call for immediate fiscal tightening.

"The president sees deficit reduction as part of a medium and long-term growth strategy. Coming to the G8 and G20 his main focus is these things are not exclusive," the administration official told reporters.

"Taking the steps necessary to sustain demand and the economic recovery that has begun is absolutely necessary. But also any kind of medium and long-term growth strategy has to incorporate fiscal consolidation," he said.

On Saturday, the talks are due to move onto international security problems.

"The session tomorrow is going to focus on peace and security, Iran and North Korea will be discussed," said another senior US official.

"Tomorrow is also the day the president has bilateral meetings with South Korea in particular, so we expect it to be a topic of discussion with them, as well as with China and Japan the next day."

The leaders -- from Britain, Canada, France, Germany, Italy, Japan, Russia and the United States -- held closed door talks at an exclusive lakeside resort among themselves and with a group of African leaders.

Europe has been spooked by a sovereign debt crisis that has pushed some eurozone members such as Greece to the brink of default -- threatening the stability of the euro and of some European financial institutions.

Merkel has led the way in pushing for governments to rein in their record deficits, and has vowed to slash Germany's own spending by 80 billion euros (98 billion dollars) over the next four years.

Britain's new government this week announced the biggest cuts in decades in an emergency budget aiming to cut its record deficit of 154.7 billion pounds (188 billion euros, 230 billion dollars) in the 2009-10 financial year.

But some other capitals, including Washington, fear a dramatic attack on spending could undermine jobs, consumer demand and even the strength of the global recovery -- threatening a "double dip" recession.

In the city of Toronto around 2,000 protesters -- a loose coalition of leftist activists and anarchists -- faced off against riot police, but there was no serious violence and no more than a handful of arrests.

Larger protests were planned for Saturday when delegates return to the city from the Huntsville resort to meet more world leaders under the auspices of the larger G20 group of developed and emerging economies.

Canada has spent a billion dollars to secure the summit behind a ring of steel and police reinforcements, hoping to avoid a repeat of the large-scale street violence that has marred previous global meetings.

Aside from moving closer to agreement on the economic challenge, the leaders announced a five-billion-dollar package of aid to help protect mothers in the developing world from illness.

But activists derided the deal, accusing summit host Prime Minister Stephen Harper of Canada of trying to divert attention from a 20-billion-dollar shortfall in the delivery of aid promised at previous summits.