Her CSU-CDU-SPD coalition is a shaky one with regular infighting and growing concern over its long-term security.
Joachim Lang, director-general of the Federation of German Industries (BDI), told CNBC the political situation was “unusual” – far from a good environment for economic growth.
He said: “The situation is very unusual but my gut feeling is that they have realised the danger and they now have to make up their mind if it’s better to stay in a grand coalition or to go their own ways.
“This decision will be made within a few weeks.”
Klaus Rosenfeld, chief executive of manufacturing group Schaeffler, also raised concerns over the country’s political and economic climate.
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He told CNBC: “The challenges for the short-term, but also the mid and long-term, can only be solved together, if business leaders and politicians work together.”
Markus Steilermann, chief executive of manufacturer Covestro, said it was time for Mrs Merkel to move the country into “doing mode”.
He added: “We really need to address the big picture items, we need to stop talking about small items and in-fights, we really need to move now and make sure we address key issues to boost the German economy and strengthen Germany in the context of having a very stable European Union.”
The appeals for action come after a shock poll revealed Germans are rapidly losing faith in Mrs Merkel’s coalition.
A survey by polling institute Emmid of 503 German people for Bild newspaper on September 20 has revealed more than half (52 percent) believe Mrs Merkel has lost control of her coalition government.
Two-thirds (67 percent) think the leaders of the CDU, CSU and SPD can no longer work together with confidence.
43 percent of respondents said Interior Minister Horst Seehofer, also leader of the CSU party, has suffered the greatest loss of credibility.
More than a fifth (22 percent) believe Mrs Merkel has suffered the biggest damage, followed by SPD leader Andrea Nahles (16 percent).