"We … know Germany's strength is not infinite," Merkel said Thursday before parliament.
As the European debt crisis deepens, world leaders have increasingly looked to Merkel for help.
Spain, which this weekend asked for a rescue package worth up to 100 billion euros, also had its credit rating downgraded by Moody's to Baa3 – one notch above junk. Last week, Fitch also slashed its rating for the country.
But "miracle solutions," such as the euro zone-wide banking union backed by officials from Spain, Italy and France, are "counterproductive," Merkel said. Germany, as the continent's largest and strongest economy, would end up shouldering much of the burden if debts were to be shared across several countries.
Instead, the chancellor called for deeper political integration across the continent.
"I know that it's arduous, that it's painful, that it's drawn-out," she said. "It's a Herculean task but it is unavoidable."
Whether it comes to pass is another matter. Merkel is headed for a faceoff next week during the
Other topics at the confab "will all be overshadowed" by the malaise in Europe, Merkel said.
"It will dominate the discussions," she said. "And therefore there is no doubt that we, that Germany, will be the center of attention."