In Kyiv, EU foreign policy chief Federica Mogherini urged Ukraine to implement anti-corruption reforms demanded by global creditors.
European Union headquarters said in a statement Monday that "an assessment of the situation did not justify a change in the sanctions regime".
Merkel also said she supported the deployment of a United Nations peacekeeping force to eastern Ukraine.
Ukrainian President Petro Poroshenko, addressing a business forum later, expressed confidence a compromise could be found over the anti-corruption court that would satisfy both the Venice Commission and be in line with Ukrainian law.
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The EU also has economic sanctions, targeting specific sectors of the Russian economy, which will be reviewed on 31 July, and further "restrictive measures" in relation to the annexation of Crimea and Sevastopol, which are in place until 23 June 2018.
But the European Union has become frustrated at the slow pace of reforms in Ukraine and widespread corruption. Setting up an anti-corruption court is a key reform that Kyiv must pass to qualify for aid from the International Monetary Fund.
Poroshenko said the final "text of the bill will comply with the recommendations of the Venice Commission, Ukrainian legislation and the Constitution".
The European Union has extended sanctions on Russian Federation for six more months over its actions against Ukraine, the European Council said on Monday.