If monetary union failed and the euro ceased to exist, there would be “incalculable consequences” for Europe, she said.
“If the euro fails, other things will fail. The idea of European unity will fail,” Merkel said in her speech at an award ceremony in honour of Polish Prime Minister Donald Tusk in the western city of Aachen.
“It is the greatest test Europe has faced since 1990, if not in the 53 years since the passage of the Treaties of Rome,” she said, referring to the foundations of European integration.
Europe's common currency has been battered by the Greek debt crisis and subsequent bailout, amid fears the eurozone could even break up, with countries going back to their national currencies.
The euro had to be protected because it stood for “European integration,” Merkel said, adding she was confident that “today’s currency crisis” could be overcome.
She said current events should be an opportunity to overhaul the internal workings of the European Union to allow tighter dovetailing of the member state’s economic and fiscal policies. Europe had grown since the Maastricht Treaty set the foundation for monetary union in 1992, “but the internal composition has not kept pace,” Merkel said.
“We must use the opportunity of the crisis to make up for the failures that were also not corrected by the Lisbon Treaty,” she said.
Picking up the theme, Tusk, who was receiving the annual Charlemagne Prize for contribution for European unity - a prize Merkel won in 2008 - said the crisis was ''paradoxically a chance for Europe to strengthen and grow together.''