"We know the responsibility of the Nazis for the civilizational rupture of the Shoah," Merkel told journalists at a joint press conference with Netanyahu in Berlin, adding that there was no reason for Germany to change its thinking about its history of war crimes.
'Mufti said: burn them'
In a speech on Tuesday, Netanyahu had suggested that Hitler was not planning to exterminate the Jews until he met Palestinian nationalist Haj Amin al-Husseini, the Grand Mufti of Jerusalem, in 1941.
"Hitler didn't want to exterminate the Jews at the time. He wanted to expel the Jews," Netanyahu told the World Zionist Congress.
"And Haj Amin al-Husseini went to Hitler and said: 'If you expel them, they'll all come here.' 'So what should I do with them?' he asked. He said: 'Burn them.'"
Wave of outrage
Holocaust scholars and politicians from around the world rushed to condemn Netanyahu's remarks on Wednesday, forcing him to gradually row them back.
At the Wednesday evening press conference in Berlin, Netanyahu acknowledged that "no-one should contest" Hitler's role as the person bearing the main responsibility for the Holocaust.
But he added that Palestinian President Mahmoud Abbas should be asked "why he holds up the Mufti as an icon for the Palestinians".
"The Mufti was a criminal accomplice of [SS head Heinrich] Himmler and [Holocaust organizer Adolf] Eichmann in carrying out the Holocaust," the Israeli leader said.
"The man was a war criminal. He was a man who collaborated with the Nazis."
For his part, Abbas said that "Netanyahu exonerated Hitler of his crimes and shifted the blame onto Amin al-Husseini. In this way he wants to attack our people, in a pathetic way".
Talks with USA
Netanyahu is to meet with US Secretary of State John Kerry in Berlin on Thursday to discuss the outbreak of violence that has roiled Israel and Palestine in recent weeks, with nine Israelis and around 50 Palestinians killed.
Arguments over the use of the Temple Mount, site of the Al-Aqsa Mosque and sacred to both Muslims and Jews, are seen as the flashpoint that sparked the latest round of violence.
"We hope that all sides will contribute to de-escalating the situation," Merkel said after her talks with the Israeli prime minister.
Israel's security and existence were a fundamental part of Germany's purpose, the German Chancellor added, and that would remain the case.