Merkel told Deutschlandfunk public radio that spending cuts alone were not enough but that structural reforms were needed although they took time to bear fruit and had to be forcefully implemented.
She said there were many examples in the world «where the IMF has arranged similar programmes that, after a certain phase of recession, then come very strong phases of growth», according to a transcript.
"Progress has been made in Greece,» Merkel said adding however that tax collection was still a problem.
German Foreign Minister Guido Westerwelle was due in Greece Sunday bringing «a message of encouragement and expectation» ahead of a crucial week for the debt-wracked country, according to a foreign ministry spokesman.
Officials from the «troika» of international auditors -- the International Monetary Fund (IMF), European Commission and European Central Bank -- are due back in Athens on Tuesday to assess Greece's efforts in reducing its deficit and launching structural reforms.
Merkel said the aim of restructuring some of Greece's debt was to bring it down to 120 percent of its gross domestic product by 2020 with the aim that it would then be able to return to the market.
"Already with this timeframe one sees how serious this problem is,» she said adding the Greek problem was not yet finally resolved.
Talks between Greece and private bank creditors on a critical voluntary 50-percent «haircut» on their Greek debt stalled Friday, raising the risk of a disorderly default.
A positive «troika» report and a deal on the debt writedown are vital to unlock a eurozone bailout offering another 130 billion euros ($165 billion) in loans to Greece.
Athens has already used up two-thirds of the first 110-billion-euro rescue package it secured from the EU and IMF in May 2010.