"We cannot rule out thinking about further sanctions if things do not progress," Merkel said, calling also for a "bilateral ceasefire and effective border controls" to help end the conflict in the east of the country.
The German chancellor had previously fired a warning at Russia together with President Barack Obama claiming that that Russia was triggering a "dangerous escalation" of the conflict in Ukraine due to its military presence and shelling there.
In a telephone call with Merkel, Obama said the conflict "has continued to deteriorate" since a Malaysian airliner was downed last month over rebel-held territory in Ukraine.
The pair agreed that it was "imperative" that Russia remove its convoy from Ukrainian territory and allow humanitarian aid to be allowed into the region.
