German Chancellor Angela Merkel says the EU must unite to deal with the challenge of welcoming refugees. She told lawmakers a common approach was more likely if Germany showed "courage" and "leads the way."

Although Merkel started her speech during a general debate in the Bundestag with the state of the economy and various other policy issues, she reserved her strongest words for the current refugee crisis.

"If Europe fails in this refugee crisis, it betrays its founding principles," she said, stressing that it was not just a "challenge at national level, but for the EU as a whole."

"We just have to get stuck in and remove obstacles to enable a peaceful coexistence," she told parliamentarians.

Refugees, she said, should be able to learn German quickly and find work. To that end, the government would agree a set of measures by October, she told lawmakers. On Monday, the coalition government pledged 6 billion euros ($6.7 billion) for the care of migrants in its 2016 budget.

She pointed out that Germany's "strength and power" in cooperation with partners like France had often worked in the past and were once again key to solving the current crisis.

"If we show courage and lead the way, a common European approach is more likely."

She stressed that the EU not only needed "binding agreements for a binding distribution of refugees," but also rules on "how we treat refugees." Only then, she added, will Europe be able to tackle the "roots" of the refugee crisis.

Merkel emphasized the importance of dialog with Turkey and the transit countries to coordinate efforts in the crisis.

She also said that integrating refugees was a central challenge and that Germany should learn from its experience in the 1960s when tens of thousands of so-called guest workers - "Gastarbeiter" in German - flocked to Germany to find work.

"If we do it well, it will have more advantages than disadvantages," she said. She did, whoever, say that economic migrants - i.e., those not facing persecution or discrimination, could not be accepted in large numbers and should be sent back to their country more quickly.

She made it clear that violence, whether verbal or physical - was "repulsive and shameful," and that those who spread "dumb messages of hate" would "feel the full force of the law." There have been far-right protests and arson attacks at several refugee shelters in recent week, mostly in eastern Germany.

Merkel's speech in the Bundestag coincided with EU Commission President Jean-Claude Juncker's State of the Union address in Brussels.

He called on EU states to agree as early as next week to relocate 160,000 refugees from frontline countries. He also urged members states to show unity, bemoaning a "lack of union" in the refugee crisis.