The former Conservative MP said it was “typical European arrogance” that Mrs Merkel thought she could continue to be chancellor despite being “defeated by the public”.
Appearing on BBC This Week, Mr Portillo said: “I did think it was extraordinary that Mrs Merkel, who lost 8.6 percentage points at the last general election, did not see the writing on the wall.
“It was a massive vote of no confidence in her. It was an entirely self-inflicted wound to invite a million Syrians into the country. It has created the rise of this very dangerous Alternative for Germany, the AfD party.
“It is extraordinary that we now have an ultra right-wing party in Germany today.
“It is Mrs Merkel’s fault and the German people have punished her.”
Angela Merkel faced an underwhelming victory after entering her fourth term as Chancellor of Germany in September.
The Christian Democrats Union party declined to 33 per cent, its worst result in 30 years.
The anti-immigration group AfD took 13 per cent of the vote and became the first far-right party to enter the Bundestag in over 60 years.
Due to the unexpected German election results, Mrs Merkel’s only feasible option was to enter a coalition with the Free Democrats (FDP) and the Greens.
But Ms Merkel’s efforts to create a coalition failed as the three parties were unable to reach an agreement on key issues such as migration and finances.
Mr Portillo also lashed Mrs Merkel’s decision to use Syrian refugee crisis to “bring Germans back together”. He said: “It is a massive insensitive incomprehension of what the German people are like”.
He said the German economy has “on the whole performed pretty well” considering the state of its Government.