Merkel will say that “27 states in Europe must be persuaded more strongly than ever to hold together as a community,” according to a script of the annual televised address released by her office.
Britain is on course to leave the bloc in March 2019 after last year's referendum vote for Brexit — leaving the European Union with 27 members.
As for Germany, its “future is bound indivisibly with the future of Europe,” the chancellor will declare, recalling that Berlin hopes to work with France's pro-European President Emmanuel Macron to future-proof the EU.
“The question will be whether we Europeans can represent our values inwardly and outwardly, with self-confidence and with solidarity,” she will add.
Brexit and fights over upholding democratic norms and sharing responsibility for refugees are weighing on continental cooperation.
Europe must be economically strong and fair, as well as able to “protect our external borders and the security of our citizens,” according to the text.
Merkel and Macron vowed in mid-December to deliver a plan to reform the 19-nation euro single currency area.
Divisions persist among eurozone members, with wealthy northern countries such as Germany, Finland and the Netherlands loath to accept risk-sharing with states they see as less fiscally disciplined like France, Spain or Italy.
At home, Merkel is exploring a possible coalition with the centre-left Social Democrats in order to form a government after a tricky election in September.
She will promise in Sunday's speech “to form a stable new government for Germany quickly in the new year”, backed by a majority of parliamentarians.
“The world is not waiting for us,” the chancellor will say.
“We have to create the conditions now for Germany to do well in the coming 10 or 15 years.”
One round of talks with the ecologist Greens and pro-business Free Democrats failed in November. That left Merkel the unappetising option of renewing a “grand coalition” between her centre-right CDU and the centre-left Social Democratic Party (SPD).
Politicians and commentators expect it could be March before a new government is in place.