"I am doing everything I can as chancellor to ensure the international community follows a common path to make clear to Iran what is possible and what is not possible and where the red line is," she told reporters on Saturday after a meeting with Hosni Mubarak, the Egyptian president, in Berlin.
"I find it very hopeful that the IAEA has succeeded in getting a resolution that brings in the UN Security Council," she said, referring to the International Atomic Energy Agency.
The Security Council has begun examining how to persuade Iran to suspend uranium enrichment-related activities after the UN nuclear watchdog sent the 15 members a report on Wednesday saying it could not verify that Iran's work was peaceful.
Merkel said splits within the European Union and among other western countries over US plans to invade Iraq in 2003 had cost the west an opportunity to exert pressure that might have helped to avoid the war.
"I think that this split in the European Union and the western community meant that pressure which could have been exerted on Saddam Hussein was not"
the German chancellor
"I think that this split in the European Union and the western community meant that pressure which could have been exerted on Saddam Hussein was not," she said.
Merkel's comments followed a guest article in a German newspaper by Foreign Minister Frank-Walter Steinmeier who warned against getting dragged into "sabre rattling" by antagonistic comments from Iranian officials.
"This is the hour of diplomacy," he said in an article for the Bild am Sonntag weekly.
On Friday, George Bush, the US president, called Iran a "grave national security concern" and said Washington would work with its partners to resolve the issue diplomatically.
The Security Council, which has the power to impose sanctions on Iran, is seen as unlikely to do so soon, but Steinmeier urged Tehran to accept the world community's demands.
"The United Nations Security Council will send an unmistakable message to Tehran next week that the world community stands united against Iran's dangerous nuclear ambitions," he said.
Iranians deny intentions to
develop an atom bomb
"I call on the Iranian leadership to accept this message," he said. "My appeal to Tehran is this. Only cooperation with the world community will open the way to a good future."
Western powers including the European Union and the United States are concerned that Iran wants to build nuclear weapons, and say Tehran has failed to provide credible guarantees that its nuclear programme serves only peaceful purposes.
The Iranians deny intentions to develop an atom bomb, but reject what they call Western bullying over the issue and say they have the right to develop nuclear technology.