As leaders move ahead in uncharted territory, a breakthrough will be achieved not by "less Europe, but more," she told members of her conservative party gathered for their annual convention in the eastern German city of Leipzig.
The European Union's treaties must be overhauled to create a tighter political union, including measures to force countries in violation of fiscal discipline rules to face tough and automatic sanctions, even possibly hauling them to the European Court of Justice, Merkel said.
"We must develop the European Union's structure further. That does not mean less Europe, but more. That means creating an Europe that ensures that the euro has a future," she said in unusually passionate comments.
The leader of Europe's biggest economy said the crisis led people across the continent to realize that the problems of any state within the 17-nation eurozone today are also the problems of all other members.
"Our responsibility no longer stops at our countries' borders," she insisted.
Merkel's comments came amid rising criticism of the EU within her Christian Democratic Union in the wake of costly bailouts of Greece and other debt-swamped member nations.
The chancellor stressed that Germany depends on the EU as its main trading partner, and insisted that the country can only wield global influence as a leading European nation. Germany, a country of 82 million, is the world's fourth-largest economy.
"Alone, with just more than one per cent of the world's population, we won't achieve much," she said.
"The euro is more than a currency. It is the symbol of Europe's unification. It is the symbol for half a century of freedom and peace," Merkel said. "Now we have to make sure that Europe will emerge strengthened from this crisis."
The Christian Democratic Union is set to debate European policies later Monday amid mounting criticism of the government's handling of the debt crisis. Several motions have been proposed that could, if adopted, reshape Merkel's policies and irk partners in other European capitals.
One proposal calls for the government to push for EU treaties to include the possibility of members states leaving the 17-nation currency zone — currently legally impossible.
In another motion, a party committee wants large economies to be given a bigger say on the European Central Bank's governing council. That would give Germany, Europe's biggest economy, the greatest voting power. The 17 eurozone central bank presidents on the council currently have equal voting power.
Merkel, who does not stand for re-election as the party's chairwoman until next year, also defended a series of political decisions that have been criticized by many party members, including a motion to introduce a national minimum wage, abandoning conscription and speeding up the country's exit from nuclear power.
The party must remain faithful to its core values, but must always find modern answers to new challenges such as Japan's Fukushima nuclear disaster, Merkel said. "The world has changed through Fukushima," she said.
Merkel's government ordered seven older nuclear power plants to be shut permanently within weeks of Japan's March, 11 nuclear disaster, and decided to speed up abandoning nuclear power altogether by 2022.
Juergen Baetz, The Associated Press