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.

Merkel had arrived with five German business leaders who were to be joined by counterparts from five Canadian firms during a business luncheon Thursday, August 16 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, according to AFP.