Germany has traditionally been cautious over data collection, but if countries are too restrictive then "big data management will not be possible", Merkel told the 10th IT Summit (link to video in German) in Saarbrücken.
Europeans are famous for banning things, Merkel said. These bans are put in place for good reason, she said, but can be damaging if taken to excess.
"In Germany we have the principle of 'data minimisation', but we may have to give a little on that. Such a principle doesn't seem as appropriate when you are looking at big data," she said.
While it is important to protect personal data, it is also important to enable new developments, she said.
"Courts will have to be careful not to be too strict if that means limiting opportunities", Merkel said.
Munich-based data protection expert Kirsten Wolgast of Pinsent Masons, the law firm behind Out-Law.com said Merkel's comments suggest a change of direction.
"Merkel obviously wants to create some space for big data business models, and make it a bit easier to establish. But we'll have to wait and see whether the data protection authorities or courts take her comments into account," Wolgast said.
Berlin data protection commissioner Maja Smoltczyk said this month that nine of the country's federal data protection authorities are to conduct a review of 500 businesses' data transfer arrangements.
The review will focus on arrangements the businesses have in place for transferring personal data outside of the European Economic Area (EEA).