Chancellor Angela Merkel said she was not worried about the possibility of Russian meddling with the upcoming election in Germany.
"I am not the kind of a person that is easily scared," she told reporters at a joint press conference with Russian President Vladimir Putin in Sochi on Tuesday.
Berlin would take "decisive action" if fake news were distributed, Merkel added, citing the examples of thefictional rape of a Russian girl or claims against German troops in Latvia. Merkel expressed confidence that Germans "will be able to campaign amongst themselves, without interference."
In turn, Putin dismissed the allegations about political meddling in the West as "rumors."
"We never interfere in the political life and the political processes of other countries and we don't want anybody interfering in our political life," he said.
Merkel traveled to Sochi on Tuesday for her first visit in two years, as part of her tour ahead of the upcoming G20 summit in Hamburg. Relations between Berlin and Moscow deteriorated following the Crimea crisis which started in 2014, and Germany and Russia are at odds over conflicts in Syria and Ukraine.
Police in Russia more 'liberal' than in EU
Merkel also urged Putin to "use his influence" to protect gays in the Muslim-dominated Russian republic of Chechnya. Recently, Russian activists reported that state authorities were rounding up gays and torturing them, and several were allegedly killed in the crackdown.
Additionally, the German leader stressed the right of anti-government forces to hold rallies against the Kremlin, after scores of protesters were arrested.
Putin responded by praising the Russian security forces, saying they were "more reserved and liberal" than many of their European colleagues who used "tear gas and batons" to disperse protest.
"Thankfully, we had no need for this so far," he said.
Ukraine talks to continue with new French president
The two leaders also discussed the conflict in Ukraine with Merkel pointing out "pleasing developments" in the peace talks, hinting at a possibility that sanctions against Russia could be "lifted at one point in time."
The move, however, depends on Moscow's role in ensuring peace in the slow-moving process.
Germany played a key role in maintaining a regime of economic sanctions against Russia in the fallout from the Crimea crisis. The sanctions, however, came with a hefty price tag for Berlin. The volume of trade between the two countries dropped from 80 billion euros ($86 billion) in 2012 to 47 billion in the first 11 months of 2016.
Putin confirmed that the Kremlin was committed to the so-called Minsk peace accord, but called on Kyiv to negotiate with the rebels and recognize special status for the disputed Luhansk and Donetsk regions.
"It is impossible to achieve a resolution for the conflict without direct dialogue," he said.
The talks which involve the leaders of Russia, Ukraine, Germany and France are to continue after the presidential election in France, Putin added.