Angela Merkel has said Brexit is a "wake-up" call for the rest of the European Union.
The German Chancellor, who is set to stand down next year, said Britain's imminent departure from the EU is a sign the bloc needs to up its game.
But she defended the EU's core principles, saying it has acted as a "life insurance" policy for smaller countries.
During an interview with the Financial Times, Ms Merkel urged the EU to become more “attractive, innovative, creative, a good place for research and education... Competition can then be very productive."
She warned that Brexit was a "wake up call" for Europe.
But she remained positive on the bloc's role, saying: "I see the European Union as our life insurance.
"Germany is far too small to exert geopolitical influence on its own, and that’s why we need to make use of all the benefits of the single market.”
Ms Merkel also argued that international institutions like the EU were “essentially a lesson learnt from the Second World War, and the preceding decades".
She has previously said little about Brexit, only breaking her silence last year to say that Britain would be a potential competitor to the EU after its departure.
