It comes as police in Cologne fired water canon to disperse protesters from the far-right group PEGIDA, who have been staging a rally in response to the attacks.
The reports of attacks on women in Cologne by gangs of men described by police as mostly of "Arab or North African" origin has ramped up pressure for stricter measures in Germany, which took nearly 1.1 million migrants last year.
Some 121 women are reported to have been robbed, threatened or sexually assaulted during New Year's celebrations near the city's twin-spired Gothic cathedral.
It has served to heighten tensions over immigration and fuelled criticism of Mrs Merkel's refusal to cap the number of migrants entering the country.
Speaking at a meeting of the Christian Democrats on Saturday, Mrs Merkel said: "If a refugee flouts the rules, then there must be consequences, that means that they can lose their residence right here regardless of whether they have a suspended sentence or a prison sentence.
"Serial offenders who consistently, for example, return to theft or time and again insult women must count on the force of the law."
She added: "This is in the interests of the citizens of Germany, but also in the interests of the great majority of the refugees who are here."
Under current laws, asylum seekers are only deported if they have been sentenced to jail terms of at least three years, and if their lives are not at risk in their countries of origin.
deportation threshold, the proposal put forward by Mrs Merkel's party would also strengthen the ability of police to conduct checks of identity papers.
The moves, which would need a change to German law, come as around 1,700 police gathered on the streets of Cologne to supervise a rally by PEGIDA supporters.
There was also a separate demonstration staged by mostly women to protest against the assaults.
The city's chief of police was sacked for his handling of the incidents amid claims officers covered up the involvement of large groups of migrants.
Earlier in the week, German police said they had identified 32 people who were suspected of playing a role in the Cologne attacks of whom 22 were asylum seekers.
Mrs Merkel's Christian Democrats (CDU) party has said it aims to reduce and control migration to Germany.
The proposal did note "a continuation of the current influx would overwhelm the state and society even in a country like Germany in the long run".
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