European leaders gathered in the German city of Aachen on Thursday, May 1, to pay tribute to Merkel's contributions to European unity.
For her part, Merkel reminded Europeans of the progress the continent has made.
"After centuries of violent confrontations, we have created what once could hardly have been imagined -- peaceful and friendly cooperation in Europe," she said in her speech, adding that Europe could serve as a model for other regions.
Addressing her as "dear Angela" in a speech of eulogy, Sarkozy said, "She has taught me that hope requires time [to work]."
Mutual compliments continued when Merkel replied in French, thanking Sarkozy "from her heart" and praising his "adeptness and honesty" in winning office as president a year ago and "leading France back into the heart of the European Union."
"Too beautiful and too fair"
Sarkozy added that Paris and Berlin would have to work together to push the European Union forward, adding that Europe is "too beautiful and too fair of an idea to be an idea only for the elite."
The annual award, in the historic town hall of the western German city, honored Merkel for mediating a solution to the political crisis in the EU last year that led to the EU reform treaty called the Treaty of Lisbon.
At a church service that began the day's festivities, the Catholic bishop of Aachen, Heinrich Mussinghoff, criticized the reform treaty's silence about religion.
He said the fundamental document should have expressly mentioned both the Judeo-Christian heritage of Europe and the role of Islam.
Among those on the guest list Thursday were Dutch Prime Minister Jan Peter Balkenende, Belgian Prime Minister Yves Leterme, Luxembourg Prime Minister Jean-Claude Juncker and King Juan Carlos of Spain.
The European leadership prize, awarded since 1950 in Aachen, a near the Belgian and French border, is named after the Emperor Charlemagne (768-814) who united a vast region of Europe from France to northern Germany.
The prize comprises a cash award of 5,000 euros ($7,700) and a medal. Previous winners include former US president Bill Clinton (2000). Last year the award went to EU foreign policy supremo Javier Solana.