The German chancellor, Angela Merkel, has courted growing anti-immigrant opinion in Germany by claiming the country's attempts to create a multicultural society have "utterly failed".

Speaking to a meeting of young members of her Christian Democratic Union party, Merkel said the idea of people from different cultural backgrounds living happily "side by side" did not work.

She said the onus was on immigrants to do more to integrate into German society.

"This [multicultural] approach has failed, utterly failed," Merkel told the meeting in Potsdam, west of Berlin, yesterday.

Her remarks will stir a debate about immigration in a country which is home to around 4 million Muslims.

Last week, Horst Seehofer, the premier of Bavaria and a member of the Christian Social Union – part of Merkel's ruling coalition – called for a halt to Turkish and Arabic immigration.

In the past, Merkel has tried to straddle both sides of the argument by talking tough on integration but also calling for an acceptance of mosques.

But she faces pressure from within the CDU to take a harder line on immigrants who show resistance to being integrated into German society.

Yesterday's speech is widely seen as a lurch to the right designed to placate that element in her party.

Merkel said too little had been required of immigrants in the past and repeated her argument that they should learn German in order to cope in school and take advantage of opportunities in the labour market.

The row over foreigners in Germany has shifted since former central banker Thilo Sarrazin published a highly-controversial book in which he accused Muslim immigrants of lowering the intelligence of German society.

Sarrazin was censured for his views and dismissed from the Bundesbank, but his book proved popular and polls showed Germans were sympathetic with the thrust of his arguments.

One recent poll showed one-third of Germans believed the country was "overrun by foreigners".

It also found 55% of Germans believed that Arabs are "unpleasant people", compared with the 44% who held the opinion seven years ago.

In her speech, Merkel said the education of unemployed Germans should take priority over recruiting workers from abroad, while noting that Germany could not get by without skilled foreign workers.

The chancellor's remarks appear to confirm a suspicion that she has sympathy with Sarrazin's anti-immigrant rhetoric. On Friday, he declared: "Multiculturalism is dead".

Other members of Merkel's government disagree. In a weekend newspaper interview, her labour minister, Ursula von der Leyen (CDU), raised the possibility of lowering barriers to entry for some foreign workers in order to fight the lack of skilled workers in Europe's largest economy.

"For a few years, more people have been leaving our country than entering it," she told the Frankfurter Allgemeine Sonntagszeitung.

"Wherever it is possible, we must lower the entry hurdles for those who bring the country forward."

The German Chamber of Industry and Commerce (DIHK) has said Germany lacks about 400,000 skilled workers.

• This article was amended on 20 October 2010. The original sited Potsdam south of Berlin. This has been corrected.