European leaders and the IMF chief headed into fresh talks on the eurozone on Wednesday as new data showed the German economy was able to grow robustly last year despite the drag of the debt crisis.

French President Nicolas Sarkozy was to meet IMF head Christine Lagarde in Paris after France received some rare good news on Tuesday with an assurance from ratings agency Fitch that it would not downgrade French debt this year.

After meetings this week with Sarkozy and Lagarde, German Chancellor Angela Merkel was to hold talks later Wednesday with Italian Prime Minister Mario Monti, as part of a flurry of German diplomatic action on the crisis.

Strengthening Merkel's hand in her effort to promote fiscal responsibility, data showed Wednesday that the German economy, Europe's biggest, remained the powerhouse and one of the few bright spots in the eurozone.

German gross domestic product (GDP) expanded 3.0 percent in 2011, compared with record growth of 3.7 percent the previous year, even though the eurozone crisis began to crimp growth in the fourth quarter, official data showed.

The strong performance enabled Germany to bring down its public deficit to just 1.0 percent of GDP last year from 4.3 percent a year earlier.

Growth was driven primarily by domestic demand, with consumer spending up 1.5 percent, the strongest increase in five years.

Elsewhere in the 17-nation eurozone, however, prospects were less rosy.

Ahead of his talks with Merkel, Monti made it clear that he believed Italy deserved more than scolding from Germany and should instead be recognised for its efforts in the crisis.

"The problem is that despite our sacrifices, we have not got anything in return from the European Union, such as a drop in interest rates," Monti told German daily Die Welt.

"Unfortunately, we have to say that our reform policies have not received the recognition and appreciation in Europe that they deserve," the prime minister added.

"If the Italian people do not soon see tangible success for their savings and reform efforts, there will be a protest against Europe, against Germany -- seen as the driver of EU intolerance -- and against the ECB," he added.

Monti came to power in November at the head of an unelected government of technocrats after a wave of financial market panic and a parliamentary revolt forced the resignation of scandal-hit Silvio Berlusconi.

The eurozone's third largest economy, Italy sparked fears that its toxic mix of low growth, high debt and spiralling borrowing costs could force it to seek a bailout like fellow eurozone members Greece, Ireland and Portugal.

Monti has pushed through a crushing austerity plan in an attempt to fix the nation's problems.

Merkel's talks with Lagarde on Tuesday focused on the struggle to cut the debt in Greece, where there have been some signs of progress.

Reports said Prime Minister Lucas Papademos told ministers a deal with private creditors to wipe 100 billion euros ($128 billion) off Greece's debt mountain of 350 billion euros could be reached early next week.

Meanwhile, as talks continued on a new EU budgetary pact, a draft version of the new rules seen by AFP showed EU members backing away from granting more power to Brussels.

The latest version of the text for the new pact on fiscal discipline, which is expected to be apply to all EU members except Britain and to be signed on March 1, was handed out to the 26 governments involved on Tuesday.

The new draft removes the power of the European Commission to take a eurozone state to court for breaking the rules on budget limits and rules out extending sanctions on budget deficits to cover public debt.

European stock markets held steady in opening deals on Wednesday, with London's benchmark FTSE 100 index slipping just 0.02 percent to 5,694.59 points.

Frankfurt's DAX 30 eased 0.23 percent to 6,148.45 points and in Paris the CAC 40 shed 0.21 percent to 3,204.00 points.

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