If coalition talks stall Berlin would face a lengthy period of uncertainty at a time when many in the European Union are looking to Germany for leadership on issues ranging from euro zone governance to trans-Atlantic relations.
The parties hoping to form a coalition want to agree the outlines of a deal by the end of the week after two smaller parties broke a logjam by dropping demands on tax and climate policy.
The Greens also offered concessions, saying they would no longer insist on fixed dates to shut down coal-fired power stations and to ban cars with internal combustion engines.
Mrs Merkel said: “We have taken a lot of time to get through the 12 big sets of issues and I would like to thank everyone who has been working on it from our side.”
“The first stage is now finished and from tomorrow morning onwards all areas will be combed through again and then the lead negotiators will decide which are the focal points of each area that we still have to resolve.
“We are not conducting coalition talks but we already want to work out the crucial points and this will now happen until, let’s say, the end of this week or the beginning of the next.
“Then the final round will start because on Thursday November 16 we want to be finished with everything and there is still a lot of work involved.”
The three-way coalition the parties are trying to form is untested at national level, and the negotiations follow a fracturing of the vote in a national election in September.
Mrs Merkel, who is seeking a fourth term, said immigration and climate policy remained the most contentious topics in the exploratory talks.
There is broad support among her conservatives comprising the CDU and CSU for tax reforms. The CDU/CSU alliance also reached a deal on migrant policy last month.
The main sticking point to a broader deal on that front is a conservative proposal to cap at 200,000 a year the number of migrants Germany would accept on humanitarian grounds.