Against a backdrop of the brilliant white stucco, stone and deep pink silk wallpaper, I first became aware of the meeting of minds between Pope Benedict XVI and Jonathan Sacks, the Chief Rabbi of the United Hebrew Congregations of the Commonwealth, to give him his full title.

We were in the plush Waldegrave Drawing Room at St Mary's University College, Twickenham, on the second day of the Pope's visit to Britain in September last year and I was watching the two leaders sharing a few private moments together before the Chief Rabbi formally welcomed the Pope to an interreligious meeting with representatives of non-Christian faiths. Some 15 months later the two men were sharing another few intimate moments, this time in the much more opulent surroundings of the papal apartment in the Vatican at the end of an audience with Pope Benedict, when all advisers withdrew leaving the two leaders to speak unmonitored.

After their encounter at St Mary's, Lord Sacks said that "soul touched soul across the boundaries of faith and there was a blessed moment of meeting". On 12 December the Chief Rabbi described his historic tête-à-tête with the Pope as warm, gentle and spiritual. It was, as he said afterwards, simply "a beautiful moment". For his part, the Pope emphasised that Christianity shared many beliefs with Judaism, identifying the Covenant with Abraham and the Ten Commandments in particular. This theme underpinned the two-day visit of Lord Sacks to Rome and to the Vatican where the Chief Rabbi delivered a public lecture at the Gregorian University.

Preparations for this month's visit started soon after the Pope returned home from Britain last year. The Chief Rabbi's office asked me to facilitate another meeting. I responded positively because although this would be a time-consuming exercise - it took more than 12 months of negotiations - I was motivated by the opportunity to regain momentum at the highest level in Jewish-Catholic relations, which had been bogged down in some wellpublicised disagreements during recent years.

Jonathan Sacks and Joseph Ratzinger have much in common, not only because they are leaders of their respective faith communities but both are also profound European thinkers and, at times, more suited to life among the intelligentsia than the "rough and tumble" of the Jewish and Catholic worlds.

The Cardinal Bea Centre for Judaic Studies, based at the Gregorian University, responded immediately to my request for help. Our joint hope was that the visit, and the accompanying public lecture, would provide a unique opportunity for Jewish and Christian leaders to stand side by side in offering their reflections on the challenges facing Europe. Little did we realise that the visit would coincide with the economic and political turmoil sweeping through the Continent.

As the Chief Rabbi said at the Gregorian University lecture: "Stabilising the euro is one thing, healing the culture that surrounds it is another. A world in which material values are everything and spiritual values nothing is neither a stable state nor a good society. The time has come for us to recover the Judeo-Christian ethic of human dignity in the image of God. When Europe recovers its soul, it will recover its wealth-creating energies. But first it must remember: humanity was not created to serve markets, markets were created to serve humankind."

Before the papal audience proper, the Chief Rabbi and his party were given a private tour of the Vatican Library, and viewed some ancient Hebrew and Aramaic manuscripts. We then moved from the quiet of the library to the beautiful and ornate rooms of the Vatican apartments - reminiscent of Versailles - with their rich tapestries and golden thrones.

Apart from their private moments together, the Pope and the Chief Rabbi were accompanied by numerous courtiers and advisers. Key among these was Cardinal Kurt Koch, president of the Commission of the Holy See for Religious Relations with the Jews, who took over responsibility for Catholic-Jewish relations from another European theologian, Walter Kasper, in the summer of 2010. The first 12 months have been a learning process for Kurt Koch, a warm man, who has a powerful intellect and quiet personality.

Cardinal Koch, who had a private meeting with the Chief Rabbi earlier in the day and chaired the public lecture in the evening, explained that the Jewish-Christian encounter has a "distinctive individual relationship". He quoted the words of Pope John Paul II, who stated that "the Jewish religion is not something that is ‘extrinsic' to us but in a certain way is ‘intrinsic' to our religion".

There was no doubting the warmth of Pope Benedict's encounter with the Chief Rabbi, which began with a blessing. Lord Sacks expressed his concerns about the collapse of faith and the loss of soul in Europe, warning of the consequences if a godless society dominated its future. This is a subject close to the heart of Pope Benedict, who also felt that godlessness and religious indifference undermined the moral foundations of society. Both men agreed on the urgent need to reclaim the soul of Europe.

In his Gregorian address later in the day to an audience of 200, which included cardinals and bishops, professors and students, the Chief Rabbi said: "The future health of Europe, politically, economically and culturally, has a spiritual dimension. Lose that and we will lose much else besides. To paraphrase a famous Christian text: what will it profit Europe if it gains the whole world yet loses its soul? Europe is in danger of losing its soul."

During the lecture Lord Sacks recommended consideration of the significance of one term that was equally important to both Jews and Catholics: what it means to be "a creative minority". The Chief Rabbi told those listening to him: "If there is one thing Jews know how to be, it is a creative minority. So my proposal is that Jews and Catholics should seek to be creative minorities together. A duet is more powerful than a solo.

"We should enlist business leaders to help us teach that markets need morals; that without a strong ethic, there may be short-term success but no long-term viability; and that conscience is not for wimps, it is the basis of trust and confidence on which business, financial institutions and the economy as a whole depend."

Lord Sacks criticised the present marketled society as empowering self-interest to the detriment of the public good, saying: "Instead of the market being framed by moral principles, it comes to substitute for moral principle. If you can buy it, negotiate it, earn it and afford it, then you are entitled to it - as the advertisers say - because you're worth it."

Among the outcomes of the visit will be a publication, edited by Fr Philipp Renczes director of the Cardinal Bea Centre and me, which will include the Chief Rabbi's lecture. Another will be a collaborative project between the Woolf Institute in Cambridge, where I am executive director, and the Cardinal Bea Centre - the two leading European academies for the study of Jewish-Christian relations.

Building on the conversations of this visit with a series of high-level seminars and colloquia in Cambridge and Rome over the next two or three years, the Woolf Institute-Cardinal Bea Centre project will reflect on Lord Sacks' critique and will explore issues associated with morality and the markets. It will, in the words of Fr Renczes, "seek to build a European platform to showcase some of the resources that the European continent contains within its rich Judaeo-Christian heritage, resources that political leaders, economists and financiers should take into consideration when making decisions".

At times, Lord Sacks seemed like one of the great biblical prophets exhorting and critiquing the Children of Israel. Throughout, his comments were welcomed. In his words: "If Europe loses the Judaeo-Christian heritage that gave it its historic identity and its greatest achievements in literature, art, music, education, politics, and as we will see, economics, it will lose its identity and its greatness, not immediately, but before this century reaches its end.

"When a civilisation loses its faith, it loses its future. When it recovers its faith, it recovers its future. For the sake of our children, and their children not yet born, we - Jews and Christians, side by side - must renew our faith and its prophetic voice. We must help Europe recover its soul."