"I have made clear that we are entering a phase where there should be sanctions against Iran," Merkel told a joint news conference with Lebanese Prime Minister Saad al-Hariri.
Iran had rejected all constructive offers from foreign governments to resolve the dispute over its uranium enrichment activities, she said.
Western nations suspect Iran wants to use atomic technology to build a bomb, but Tehran denies that and says it is only interested in civilian power generation.
Western powers want the U.N. Security Council to approve a resolution imposing new sanctions on Tehran but is facing some resistance from China.
Some EU officials have said they need to be prepared to move rapidly to implement their own measures to rein in Iran's nuclear program if attempts to win U.N. backing drag on for too long.
(Reporting by Hans-Edzard Busemann; Editing by Angus MacSwan)
