Germany's Chancellor Angela Merkel has warned that the migrant crisis could become a bigger challenge for the European Union than the Greek debt crisis.

Merkel called on the EU to jointly tackle the growing migrant crisis before it leads to bigger problems.

Condemning the attacks on shelter homes for asylum seekers in Germany, Merkel said on 16 August, reported AFP News: "That is unworthy of our country.

"[Refugees could] preoccupy Europe much, much more than the issue of Greece and the stability of the euro.

"The issue of asylum could be the next major European project, in which we show whether we are really able to take joint action."

Merkel has called on the EU to draw a list of safe countries to be able to better judge which migrants are most in need for asylum.

Over 40 per cent of asylum seekers in Germany are reportedly from the Balkans, with a growing number of applications from southeast European countries, like Bulgaria, Croatia and Serbia.

Earlier, Merkel was entangled in a controversy over the manner in which she consoled a crying Palestinian girl in a video that went viral online and sparked major protests.

"I think the gesture was fine," said Merkel who added that it would be wrong for people to be told that, "just because you met the chancellor, we can resolve your case faster than many, many other people's."

"We are a state under the rule of law. But nevertheless, you want to comfort a crying girl," said Merkel.