"The danger that Russia will also lose part of its credibility because of these interruptions of (gas) supplies is certainly one that exists, and tomorrow in my talks with Putin I will have to address this issue," Merkel told reporters after meeting British Prime Minister Gordon Brown in Berlin.
Putin's trip to the German capital on Friday is sure to be overshadowed by the gas crisis that has left much of Europe without heat amid freezing weather.
"The events of this week are indeed very important. This is why it is absolutely essential for us (to see) Russia and Ukraine sit down at the negotiating table and resolve their bilateral issues," Merkel said.
The problems "as we see it are an expression of still-not-solved political problems that existed between the two. We will also underline this to our Ukrainian partners."
More than two weeks after cutting off supplies to Ukraine, Putin on Thursday suggested an international takeover of the Ukrainian gas transit network to Europe. In an interview with German television ahead of his trip to Berlin, Putin recommended setting up "an international consortium that would rent Ukraine's gas pipelines and maybe even take part in privatising it if Ukraine wishes."
Ukrainian Prime Minister Yulia Tymoshenko's office said a meeting with Russia to try to resolve the crisis had been arranged for Saturday.
Following the Berlin summit Putin will visit Dresden, the city where he served as a KGB agent in the waning days of the Cold War.
The German government said last week that Putin would attend the debutantes' ball on Friday at Dresden's sumptuous Semper Opera House, one of the highlights of the winter social season in Germany.
The formal affair is traditionally opened by a dance of some 90 debutantes and their partners. Putin worked for the KGB in Dresden, then part of communist East Germany, from 1985 to 1990. According to former colleagues, his activities included recruiting informants and keeping an eye on the East German authorities.