"We are aware of our great responsibility to improve the situation in the European Union, overcome the euro crisis and make possible economic growth and so make workable for the future the tried and tested model of European life, linking competitiveness and economic strength with social cohesion," Merkel said.
The two countries will produce joint proposals by May, ahead of an EU summit the following month, on how to improve economic coordination and competitiveness, Merkel said. Such initiatives were common when Hollande's conservative predecessor, Nicolas Sarkozy, was in power.
"We have to give Europe confidence in its future," Hollande said at a news conference after the French and German Cabinets held a joint meeting. "We will try to be as concrete as possible ... so that growth can be reinforced and stability guaranteed."
Merkel said the two countries want employers and employees in their countries also to come up with proposals.
"We cannot as politicians alone create the conditions for better competitiveness," Merkel said.
The Cabinet meeting came before both countries' Parliaments met in the landmark Reichstag building to mark the anniversary of the signing of the 1963 Elysee Treaty, a milestone for two countries that had fought three wars in 70 years.
In the treaty, they committed to consult on foreign policy, meet regularly and implement a host of defense, cultural and other initiatives to "profoundly transform the relations of the two peoples." Since then, they've worked closely together despite frequent differences of approach.
Merkel and Hollande laughed aside questions about their relationship.
"Our best-kept secret is that the chemistry is right," Merkel said. "What isn't easy is convincing you" that the personal relationship is good, Hollande told reporters.
The two also brushed aside suggestions of differences over Mali. There has been some criticism from German politicians of Berlin's small contribution so far to France's intervention to drive back Islamist extremists in the African country two transport planes to carry African troops to Mali.
Germany also plans to participate in a European training mission for the Malian military and provide as-yet unspecified financial help to African troop contributors.
Merkel said their defense ministers are in close contact on what Germany can do to help, but she made no new pledges and said she couldn't see Germany and France's joint military brigade being deployed in Mali.
Hollande said that Germany "immediately contributed the political solidarity and material help that were expected."
"This is not about asking Europeans to come and participate in an international force, but rather to help the Africans," Hollande said. "I have always said that it is Africans who have the answer to African questions."