Officials also agreed on Thursday to seek UN approval for an EU military operation against people smugglers.
EU leaders decided to triple funds for the bloc's maritime search and rescue operation, as horrific details continued to emerge of last weekend's shipwreck that saw hundreds drown in the Mediterranean's worst migrant disaster.
"If there must still be more, then there must be more. Then it will not fail because of money," Merkel said.
European Council President Donald Tusk said EU foreign policy chief Federica Mogherini had been tasked to "propose action in order to capture and destroy the smugglers' vessels before they can be used."
Italian Prime Minister Matteo Renzi added that leaders from France and Britain — both permanent members of the UN Security Council — had "committed to get a resolution from the United Nations for an intervention in Libya."
But leaders failed to agree on concrete action over the sensitive issue of what to do with migrants — many of whom depart from chaos-ridden Libya — once they land on European shores.
Germany, Italy and Sweden especially had pushed for a fairer distribution of asylum seekers across the EU, with fixed quotas.
"I had hoped we could have been more ambitious but that was not possible," EU Commission chief Jean-Claude Juncker said at a post-summit press briefing.
Ahead of the high-profile gathering, poignant events had taken place in Malta and Brussels to try and highlight the tragic human dimension of migrant shipwrecks.
Already, more than 1,750 migrants have died crossing the Mediterranean this year — 30 times more than the same period in 2014.
Malta honoured the more than 750 victims of last weekend's shipwreck with an inter-faith funeral service — the wooden coffins of 24 of the dead carried away by soldiers for private burials.
Dozens of migrants in Brussels staged a protest near the EU summit venue, attaching pieces of paper with the names of people who had died onto barbed wire put up as a security measure.
"Esther Down, 9 months old, Nigeria, drowned," read one of the signs.
Military response feasible?
As he arrived at the summit, Prime Minister David Cameron offered to deploy Britain's flagship HMS Bulwark, three helicopters and two patrol ships to the Mediterranean, but stressed any migrant rescued would not have "immediate recourse to claim asylum in the UK."
Other countries also offered up ships to enhance the effectiveness of the Triton search and rescue operation in the Mediterranean.
French President Francois Hollande, meanwhile, said any decision to destroy the traffickers' ships would have to be in line with international law.
"It can only be done through a resolution of the Security Council," he said.
Hollande added that he would raise the issue with his Russian counterpart Vladimir Putin when he meets him on Friday.
But experts have questioned the feasibility of a military response to the crisis.
"It's not an easy task to go shoot down boats in Libyan ports," a European source who wished to remain anonymous said.
He pointed out that the radical Islamic State group was in control of parts of chaos-ridden Libya.
"They will be delighted to see European soldiers come to them, they are potentially easy targets."
Killed, tossed overboard
Survivor accounts, meanwhile, continued to trickle in as the full horror of Sunday's shipwreck near Libya emerged.
Even before their perilous sea journey, people smugglers beat several migrants to death and killed at least one minor, those who got out alive told investigators.
The skipper, Mohammed Ali Malek, 27, was one of the 28 survivors and faces charges of illegal confinement, culpable homicide, causing a shipwreck and aiding illegal immigration.
9 mn euros a month
Triton's funding will increase from the current three million euros ($3.2 million) a month to nine million euros.
But Tusk said the mission would continue to carry out its mandate as before, going no further than 30 nautical miles from European shores — far away from countries like Libya.
On the issue of migrant relocation, draft proposals leaked before the summit had suggested that member states provide resettlement to 5,000 migrants, but no number was given in the concluding statement.
To discuss the issue further, EU and African Union officials have decided to gather soon in Malta, which like Italy and Greece is one of the countries worst affected by migrant arrivals.