"These are not just about Britain's individual interests on some issues or questions, rather it's about several points that are justified and understandable," she told parliament, laying out her government's position on the eve of the EU meeting.
"Like (British Prime Minister) David Cameron, I believe that it is necessary for the EU to improve our competitiveness, transparency and (reduce) bureaucracy. Germany has shared these concerns for many years," she said.
"Therefore, it is only natural for every member state to be able to protect its social system against abuse."
Cameron wants to restrict EU migrant workers' access to benefits such as in-work tax credits, child welfare payments and state-subsidised housing, for a four-year period.
More From This Section
However, many EU member states particularly from the former eastern bloc view this as discriminatory and at odds with the bloc's principle of free movement.
Cameron however wants all 28 members in the bloc to have a say in any issue that affects the whole of the EU, such as the euro, and not just the 19 in the eurozone.
"I share with David Cameron the view that member states that use a currency other than the euro should not be ignored in important questions," she said.
"Our aim must be to prevent discrimination while at the same time allowing for a differentiation when necessary," Merkel said.
The German leader's position appeared to run counter to France's, which had made it clear that EU states that do not share the euro should not have any power to stop the eurozone from seeking deeper integration.