Mr Çavuşoğlu’s comments come after he met German Foreign Minister Sigmar Gabriel amid thawing tensions between the two countries.
He said: “I respect Mrs Merkel very much. For the last five, six years, she has been the only real leader in Europe.”
The Turkish foreign minister acknowledged his country has had “tensions with Germany” but welcomed recent efforts to rebuild the relationship.
He said: “We can see a rapprochement between Germany and Turkey. Germany has always been our closest ally.”
But Mr Çavuşoğlu bristled when he was asked if improvements in relations would have an impact on the Turkish economy.
He said: “If you’re saying that we would only improve our relationship with another country in order to strengthen the economy, I cannot accept this.
“Turkey has dignity. We won’t bend down to anyone.”
Relations between Ankara and Berlin slumped to their lowest point in decades after a failed coup attempt in Turkey in 2016.
Berlin has led the criticism of Turkish President Recep Tayyip Erdoğan’s hardline authoritarianism while the Turkish leader has responded with a string of attacks and once compared Mrs Merkel with the Nazis.
Mr Çavuşoğlu said: “You’ve called Erdoğan a dictator. You’ve seriously insulted him.
“If you call Erdoğan a dictator, you should expect similar criticism from him.”