"To do that we have to strengthen investment capability with the help of additional structural policies", she said, adding that the fund would be phased in gradually and then evaluated in terms of its effectiveness.
She also commented that she still likes the idea of allocating funds to support reforms implemented by member states.
For Guntram Wolff, director of the Bruegel think-tank, Merkel's comments represented a "softening" of Germany's position on the debt issue.
Institutional changes to the European Union would ensure that "its voice is taken seriously in the world", she said.
For example, he is calling for the creation a eurozone budget and a eurozone finance minister.
The EU has been under pressure to show unity after US President Donald Trump's recent moves such as pulling out of the Iran nuclear deal and imposing tariffs on European steel and aluminium exports, according to Reuters.
The proposals, to be presented at an EU leaders' summit later this month, were welcomed by the European Commission, the EU's executive body. That falls well short of Mr. Macron's proposal that envisaged an instrument with budgetary firepower of around EUR200 billion ($233.2 billion).
Her proposed fixes include the completion of a long-sought banking union, a common European investment budget, and a European Monetary Fund (EMF) that would be developed from the bloc's existing bailout fund, the European Stability Mechanism (ESM). The idea partly stems from a desire to reduce Europe's dependency on the International Monetary Fund, but it is also driven by German concern that the European Commission is becoming more politicized and that enforcement of fiscal rules should be trusted to a new, independent body.
Macron has repeatedly expressed impatience with what he sees as foot-dragging by Merkel, who was tied up with five months of coalition building after an inconclusive general election in September.
Merkel also called for European cooperation on migration and asylum programs. Additionally they need to carry sanctions in opposition to Russian Federation and for Italy to maneuver nearer to its president, Vladimir V. Putin, who as soon as stated he didn't have to meddle within the Italian elections as a result of it was all going his means.