Singh and the German chancellor were speaking after a joint meeting of their key cabinet members that sought to promote trade and investment ties between Europe's biggest economy and the South Asian population giant.
The Indian prime minister said the two had discussed European debt woes and recession that have battered members of the 17-nation currency union.
"We want the eurozone to prosper and get out of this atmosphere of crisis because the eurozone countries are a most important component of the development of the global economy," said Singh.
"A strong, resilient eurozone is in the interest of all countries of the world," he said, saying this was especially true for developing countries.
"We want the multilateral trading system to remain strong, and it cannot remain strong if there is trouble in any important constituent of the global economy such as the eurozone."
He added that the strength of Germany and Merkel's commitment to the eurozone "gives me confidence that Europe's crisis atmosphere will be effectively tackled in months to come."
Merkel said, on the German economy, that "I believe that we stand a good chance of levelling out the slight contraction we witnessed last year.
"But of course the situation dominating the eurozone is of greatest importance to the rest of the world."
She added that, in the 27-member EU and the 17-state eurozone, "we for our part have to make sure that the system works and doesn't create a continuous source of irritation for the rest of the world."
The two had met, together with key cabinet members, for the Indo-German intergovernmental consultations, launched in New Delhi in May 2011. Germany only has such ties with some European neighbours, China and Israel.
While Germany, amid the crisis, wants to broaden trade and investment links with large emerging markets, India is seeking German technology and expertise in areas such as clean energies, manufacturing and education.
Ministers from both sides signed memorandums of understanding on cooperation in fields including renewable energies and power grids, agriculture, university cooperation, and the teaching of the German language in India.
Merkel said that "India has emerged from a threshold country to a very strong and vibrant economy" and praised the "very deep and close cooperation" between their nations after more than 60 years of diplomatic ties.
Singh said that "economic ties have been the defining feature of our relationship" and that he encouraged German participation in "India's rapid economic growth," especially as it builds up its infrastructure.
The two also talked about an EU-India free trade pact that has been in the works since 2007, but been held up by hurdles, days before India's commerce secretary was headed for Brussels for talks with EU Trade Commissioner Karel de Gucht.
"We want to achieve progress in the signing of the EU-India free trade agreement. We are now in a situation where it seems like we can get there. We have not yet overcome all the difficulties," Merkel said.
Obstacles include barriers to India's fast-growing automotive and insurance markets.
Merkel said that "given the importance of the automotive sector in my country, it is important for us that the automotive industry receives appropriate treatment."
She also said problems remained in the services sector, where "we need to keep negotiating, as is the case with intellectual property rights."
Singh, who was travelling with a large business delegation, arrived Wednesday to pomp, military honours and a dinner hosted by Merkel.
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