Angela Merkel says she wants to stem the flow of refugees into the European Union while at the same time keeping open borders within the bloc, days after Denmark imposed passport checks on people entering from Germany.
Merkel, who last November marked a decade in office, starts 2016 facing renewed pressure from her own conservatives to reduce the influx of asylum seekers arriving in Germany, after a record inflow of over 1 million last year sapped their support.
"It is very important to me that we achieve both a noticeable reduction in the flow of refugees ... and at the same time preserve the free movement of people within the European Union," she told reporters on Wednesday (local time) at a conference of her Bavarian allies, the CSU.
This free movement, which has resulted in 26 European countries abolishing internal border controls within their 'Schengen zone', was "a motor for economic development and prosperity", she said.
Germany's northern neighbour Denmark imposed temporary border checks on Monday, fearing that it would become the final destination for many refugees after Sweden put in place controls to stop them moving further north.
Merkel was named Person of the Year by both Time magazine and the Financial Times after opening Germany's borders to refugees in August, but the resulting wave of migrants has stretched its resources and unnerved many citizens.
The Interior Ministry said on Wednesday that a record 476,000 migrants applied for asylum last year, with the applications of another 600,000 registered migrants yet to be collected.
Despite vowing last month to reduce the numbers, Merkel is under pressure from the Christian Social Union (CSU), Bavarian sister party of her Christian Democrats (CDU), to do more.
The conservatives have been alarmed by a drop in their support from around 43 percent in mid-August to a three-year low of 36 per cent in October and November. Support has begun picking up as Merkel has sought to stem the inflow.