German Chancellor Angela Merkel questioned on Wednesday whether an increase in the euro zone's rescue funds would reassure markets and said Europe has already lost a lot of confidence by failing to deliver on its promises.

Now they say... 'it should be twice as big', she said in a speech in Davos, referring to calls on her to back increases in euro zone rescue funds.

'If it were twice as big, we'd believe you'. Some say 'it should even be three times as big, then we'd really believe you.' And I always ask myself how long is that credible and when is that no longer credible.

What we don't want (in Germany) is a situation in which we promise something we can't back up in the end because if Germany... promises something that can't be kept if markets attack it hard, then Europe is really vulnerable.

Merkel added that a lot of confidence has already been lost.

Confidence has been lost because one said 'they've promised something that they didn't deliver on', she said. Confidence is the most important currency that one can have worldwide at the moment.

(Reporting By Erik Kirschbaum and Annika Breidthardt; Editing by Noah Barkin)