German Foreign Minister Sigmar Gabriel said earlier on Thursday that his country would talk to European Union partners about Turkey's aspirations to join the bloc, and made clear Berlin could no longer guarantee German corporate investment in Turkey.
"We need to be clearer than we have been until now so those responsible in Ankara understand that such policies are not without consequences", Gabriel said.
Gabriel said, from now on, his government would not be in a position to encourage German businesspeople to invest in Turkey, and would not provide investment guarantees for German companies.
"Merkel: The measures announced by the Foreign Minister against Turkey are necessary and unavoidable", government spokesman Steffen Seibert tweeted.
Ties between Ankara and Berlin have been strained in recent months as Turkish leaders slammed Germany for turning a blind eye to the activities of outlawed groups and terrorist organizations which are hostile to Turkey. As a fellow North Atlantic Treaty Organisation member, the supply of arms to Turkey has previously been largely unproblematic for Germany.
Before that, Turkey accused Germany and other European nations such as Greece of providing shelter to those who took part in the failed military coup in Turkey past year.
Yet at the same time Germany also denied Turkish President Recep Tayyip Erdoğan's request to land his plane in Berlin after taking flight from last summer's failed coup.
"Claims of terrorist links are absurd", the German foreign ministry said in a statement demanding consular access to its citizen and the release of all the activists.
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Germany, for its part, sparked anger in Turkey's government by barring top officials from speaking at political rallies on German soil.
Germany was Turkey's top export destination in 2016, buying US$14 billion worth of Turkish exports, according to International Monetary Fund direction of trade statistics. It said Turkey was Germany's No. 15 export destination and No. 16 source of imports past year.
Steudtner "was no Turkey expert - he never wrote about Turkey, he had no contacts in the political establishment. and never appeared as a critic", Gabriel told reporters.
Mr Gabriel said the situation also affected how the EU dealt with accession programmes for Turkey and said Germany would speak to European colleagues about that in the coming days and weeks.
The German government increased pressure on Turkey Thursday after the jailing of a human rights activist, telling all citizens traveling there to exercise caution and threatening to withhold backing for German investments in Turkey.
A Turkish court on Tuesday ordered six rights activists to remain in custody for allegedly aiding a "terror" group - among them Amnesty International's Turkey director Idil Eser and Berlin-based activist Peter Steudtner. He also complained that German companies are being accused without evidence of helping terrorists.
The list included chemicals giant BASF SE (BASFn.DE), which confirmed it was on a list that had been passed to it by German police, but declined to comment on the allegations.
Mehmet Simsek, Turkey's deputy prime minister, said on Thursday the reports were untrue. By contrast, Turkish exports to Germany of some $14 billion made it the No. 1 destination for foreign sales, ahead of the U.K., Italy then Iraq. Such guarantees are offered to insure exports to many countries.