In her most detailed comments yet on the snooping and spying claims made by fugitive former US intelligence contractor Edward Snowden, she also stressed that the United States remained "Germany's most faithful ally".
Merkel, who grew up in the former East Germany, also strongly rejected the idea that the US National Security Agency's activities could be compared to those of the communist state's despised Stasi secret police.
"For me there is absolutely no comparison between the State Security of the GDR (German Democratic Republic) and the work of the intelligence services in democratic countries," she told the news weekly Zeit.
"They are two completely different things, and such comparisons only lead to a trivialisation of what the State Security did with people in the GDR," she said in pre-released excerpts from the interview.
"The work of intelligence services in democratic states has always been vital to the safety of citizens and will remain to be so in future. A country without intelligence work would be too vulnerable," she said.
Earlier this week, a German artist had projected the message "United Stasi of America" onto the facade of the US embassy in Berlin.
Merkel added that safeguarding a country against terrorist attacks would "be impossible without the option of monitoring telecommunications".
The chancellor, who faces elections on September 22, had previously said little about the Snowden claims, which have angered many in Germany, which with its Nazi and GDR history is especially sensitive to government surveillance.
After reports that the US had also bugged European missions, Merkel had said -- first through her spokesman, later in person -- that, if confirmed, this would be "unacceptable" and that "we are not in the Cold War anymore".
This week a German delegation has travelled to Washington to seek greater clarity on the surveillance, including the PRISM programme to monitor emails, online chats, pictures, files and videos uploaded by foreign users.
Merkel, asked whether she personally reads German intelligence reports, told the newspaper: "It has been the case for a long time that a coordinator inside the chancellery is responsible for the federal intelligence services, either a minister of state or the chief of staff."