German Chancellor Angela Merkel admitted that the future of the EU is at stake over the ongoing migration rows between member-states.
Mrs Merkel delivered her remarks during her annual summer press conference, which takes place before her holiday.
The embattled German leader has faced uproar at home, as she struggles to hold together a fragile coalition amid infighting.
She has also found it difficult to lead the EU as before, against now surging antagonism against the EU order in Austria, Italy and Hungary.
Challenged on whether the migration crisis would overwhelm the EU, she said: “It is a big challenge to all EU countries and has the potential to divide the European Union.
“I believe as I have often said the question of whether we could solve the migration issue together is of crucial importance to the future of the EU.
“I would say that the EU is in a process of transformation. And that is seriously acknowledged.
“But it is not yet decided if we can meet the challenges fast enough.”
The recent European Council summit focused largely on the migration crisis, amid growing splits in the bloc.
Italy demanded that countries share the burden and reform the Dublin agreement – however, the issue remains a crisis point in the EU.
The German leader added: “We face a big economic challenge, and one day certainly also military, from the strengthening of China, and we must also deal with our relationship with Russia.
“We have lots to do and the order of the world is changing.”
Mrs Merkel’s 90-minute conference with reporters also discussed Donald Trump and Vladimir Putin but Brexit was not mentioned once.
She accepted that President Trump’s attacks on Germany “have something to do with our economic size”.