Some experts say Germany's focus on exports as opposed to creating consumer demand is causing imbalances for the rest of Europe and that it should not cut spending at the same time as other, more indebted countries are doing so.
Merkel, however, rejected such notions.
"If we don't get to a sustainable path of growth but create inflated growth, we will have to pay for it with a next crisis," Merkel told journalists, defending Germany's decision to draw down stimulus spending and to implement budget cuts.
Despite starting to reduce its deficit, the country is still doing enough to support the global economy, the chancellor said after a meeting to prepare the country's position for the G-20 summit in Canada later this week.
US President Barack Obama on Friday wrote a letter ahead of the summit urging world leaders not to threaten the recovery by trimming spending prematurely. The letter also criticized countries too heavily dependent on exports — a barely hidden reference to China and Germany.
But many European nations, rattled by the sovereign debt crisis that had engulfed Greece, have already started to trim their own budgets.
Merkel rejected criticism that Germany was fueling global imbalances and pointed to the fact that the bulk of the country's exports goes to its European partners within the single market. "If you take Europe as a single entity then the balance of trade is relatively balanced," she said.
Ottmar Issing, a former chief economist of the European Central Bank and now a government adviser on reforming financial markets, stressed it was crucial to tackle the deficits.
The US, Japan and the eurozone combined this year have to refinance $5.5 trillion according to estimations, he said. "Given this background, it's hard to see that increasing the refinancing need shall be the solution for the global crisis," he added.
Finance Minister Wolfgang Schaeuble also defended the German package of welfare cuts and new taxes aiming to save ¤80 billion by 2014. It was drawn up carefully to make sure not to endanger growth, he said. "We are implementing an exit strategy, exactly as it has been decided for months," Schaeuble said during the joint news conference.
Germany will therefore face any international debate about its austerity measures "with sufficient self-confidence," he added.
Foreign Minister Guido Westerwelle, giving a speech on the European Union a few hours earlier, praised Germany's constitutional amendment against piling up deficits as a model for Europe as a whole.
Germany's so-called "debt brake," a binding rule to cut back borrowing, has a "pleasant disciplining effect," Westerwelle said.
In the letter, Obama said that the June 25-27 summit should focus on efforts to stabilize public deficits in the "medium term," a reference to the administration's position that governments still need to run huge deficits to provide the stimulus needed to ensure a sustained recovery but then move in future years to deficit reduction efforts.
But Obama is having a tough time arguing for higher spending at home as well. The Senate has blocked a scaled-down jobs bill with critics complaining that the $120 billion price-tag is still too high.
