Sanction on Iran
Netanyahu called for for "crippling sanctions" against Iran to stop its disputed nuclear programme, after talks with Merkel.
"There is not much time," he said.
"I think the most important thing that can be put in place is what the US secretary of state (Hillary Clinton) called crippling sanctions. It is possible to put real pressure, real economic pressure, on this regime if the major powers of the world unite."
Netanyahu earlier took an indirect swipe at Iran as he received blueprints of Auschwitz, a death camp where more than a million Jews were killed in the Holocaust.
"We cannot allow those who call for the destruction of the Jewish state to go unchallenged," he said at the ceremony in Berlin, Germany's capital.
"We cannot allow evil to prepare the mass deaths of innocents and it should be nipped in the bud."
Mahmoud Ahmadinejad, Iran's president, has repeatedly said that Israel is doomed to be "wiped off the map" and that the Holocaust was a "myth."
Netanyahu's German tour follows his talks with George Mitchell, the US Middle East envoy, in London, over disagreements on settlements.
Both described the four hour discussion as "very productive", but did not elaborate on any measures they may have agreed to.
In a statement, the two parties said they "agreed on the importance of restarting meaningful negotiations between Israelis and Palestinians and working toward a comprehensive peace, and that all sides need to take concrete steps toward peace".
However, Israel has resisted calls from Barack Obama, the US president, to freeze settlement building in the West Bank.
A freeze is key to the resumption of peace talks, and Israel's reluctance to budge on the issue has led to a rare rift in US-Israeli relations.
Mitchell has been pressing Israel to halt construction as a confidence-building gesture to the Palestinians.
According to some media reports, he was expected to offer Netanyahu a tougher US line on Iran's nuclear programme in return for Israel partially freezing settlement building.
An Israeli delegation is due to meet Mitchell next week in the US to continue the talks.
Following the talks in London, Mark Regev, an Israeli spokesman, said an agreement with Washington which would allow peace talks to resume could come within weeks.
"The goal is to find common ground with the American administration ... on a framework that will allow the restarting of an energised peace process," he said.
"For that process to be meaningful, the Arab world has to be part of it."
Israeli media reports have suggested that Mahmoud Abbas, the Palestinian president, will meet Netanyahu on the sidelines of next month's meeting of the United Nations in New York.
In Jerusalem, a senior Palestinian official, said: "No one - neither from the Israelis nor from the United States - contacted us for such a meeting but it could happen as a meeting but not as holding negotiations."
Settlements in the West Bank, which Palestinians want for a future state, are home to 300,000 Israelis, and around 2.5 million Palestinians.
| Abbas may meet Netanyahu on the sidelines of next month's UN meeting in New York [EPA]
A survey released on Wednesday showed freezing settlements would be an unpopular move among Jewish Israelis, with almost two-thirds of those questioned by the Maagar Mohot polling company saying they opposed the move.
Marwan Bishara, Al Jazeera's senior political analyst, said that a settlement agreement is indispensable to a peace deal because it prevents a "Palestinian independent contiguous state from emerging".
However, he said that there had been little progress in Wednesday's meeting.
"After nine months of telling Israel that they must stop the settlements, an entire government telling the American envoy in London today that they won't stop the settlement building within the settlements. That is a failure of a meeting."
On Tuesday, Netanyahu said that his government was unwilling to negotiate on the status of Jerusalem as a joint Israel-Palestinian capital.
Speaking in London at his meeting with Gordon Brown, the British prime minister, he had also said that any peace talks with the Palestinians would have to cover the issue of a "demilitarised Palestine", as well as illegal Israeli settlements in the West Bank.