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The prime minister and deputy prime minister have defended the business secretary.
At a joint Downing Street press conference the two leaders rejected Vince Cable's comments to undercover reporters reported today in the Daily Telegraph.
The press conference took place before the BBC broke the story that in the same conversation Cable claimed to have "declared war" on Rupert Murdoch.
In the account published in the Daily Telegraph today Cable, a senior Lib Dem cabinet minister said he could bring down the coalition if he took the "nuclear option" and resigned.
The paper chose not to publish his comments about Murdoch and his bid for BSkyB.
Cable claimed the coalition partners are fighting a 'constant battle' over policy.
He also claimed the prime minister wants to scrap winter fuel payments.
Nick Clegg said Cable is "embarrassed by what has happened and he is right to be".
He said any coalition can only work if disagreements are thrashed out in private and both sides come to a common position.
David Cameron said he has lost count of the times people have said an issue will blow the coalition apart, but it has worked well.
The prime minister said Cable "was very apologetic at cabinet this morning, and what he said about winter fuel payments is not true".
He said the coalition will be judged by what it does. He said its "very substantial programme" cannot be delivered "without a strong team".
"I get on with him personally very well," he added.
Cameron said he is very pleased by the way the cabinet is working.
"People are doing a good job," he added.
Asked if he trusts Cable, Cameron recalled their trip to India together on a trade mission.
"We have a good businesslike relationship he has apologised we should leave it at that."
He joked it was a "relief to find a Liberal Democrat so keen on nuclear weapons".
Clegg said Cable is "an incredibly important member of the government and an outstanding secretary of state" who took "brave decisions" on university funding.
The prime minister and his deputy faced a series of questions about Cable.
Cameron later said the business secretary is "a perfectly reasonable colleague to deal with".
"He is a big figure in politics, able to get out and make the argument for those decisions - that is what matters."
Clegg said many people agree with Cable that bankers need to reflect their changed circumstances, with the taxpayer propping them up.
It is "in their self interest to be sensitive to what wider society thinks about them".
Cameron defended the government's response to the severe winter weather.
"These are extreme conditions - five inches of snow in one hour is exceptional in the UK," he said.
The PM said ministers have taken action on resilience, with more salt on the way and vulnerable people protected with cold weather payment of £355m already this year.
Normal restrictions on night time flying, hours that lorry drivers work and rules on red diesel all been lifted to keep the country moving, he added.
Cameron said extensive disruption was understandable but he is frustrated taking so long to improve the situation at Heathrow.
Asked about banker bonuses, the prime minister said a lot of action has already been taken, with the bank levy, better regulation of bonuses and international agreements.
He said he wants to see more progress and more lending to small business.
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