Angela Merkel has said youth unemployment is the biggest crisis facing Europe and urged other governments to do more to copy the German system – concentrating on apprenticeships and not simply academic study – to prevent the emergence of a "lost generation".

In an interview before a summit to tackle joblessness among young Europeans, the German chancellor said her country's tried and tested dual system – a mix of classroom learning and on-the-shop-floor work experience – was the best way forward at a time when almost six million under-25s in Europe are out of work.

"Youth unemployment is perhaps the most pressing problem facing Europe at the present time," she told the Guardian and five other European newspapers. "We in Germany have learned a lot from successfully reducing unemployment by means of structural reform since reunification and we can now bring that experience to bear."

Twenty European Union heads of government and all of the bloc's 28 labour ministers have descended on Berlin to hammer out concrete measures to deal with the problem. Economists say the young generation faces the very real prospect of ending up worse off – materially, professionally and socially – than their parents because of the evaporation of jobs in Europe.

Hundreds of twentysomethings have told the Guardian of their endless job frustrations: receiving rejections because they are overqualified, writing scores of unanswered letters, unable to build a life without a job to structure it around.

Merkel has been blamed for compounding the situation by insisting that southern European economies balance their books rather than spend money on job-creating policies. But she dismissed the suggestion that her jobs drive was a way of boosting Germany's poor public image abroad three months before she faces a general election.

She said the Berlin conference on Wednesday was about best practice, pointing out that Germany had halved its youth unemployment since 2005. "We are now in a position to offer a place on a [dual system] training programme to every young person who wants one," she said. "That wasn't always the case … One thing that experience taught us is that there is of course no need for any country to introduce the whole dual system straight away. Inter-company vocational training can be an alternative.

"We should not just try to make our young people more academic," she said. "Germany is seeing the positive effects of skilled workers and master craftsmen having an excellent reputation too."

Merkel exhorted young Europeans as well as employers to become more flexible, calling for greater mobility in Europe. She said that with language barriers often preventing mobility, she wanted to open up the Erasmus exchange programme to include vocational training.

Five years of economic crisis have prompted thousands of Europeans to migrate in search of work. Southern Europeans are now coming to Germany in record numbers, and Merkel quipped that while not all of them would enjoy the conditions offered to the Spaniard Pep Guardiola as Bayern Munich's new coach, they would be given good chances in Germany.

"We have no intention of expanding the low-wage sector, as there is a great demand for skilled workers, which cannot always be met by Germans, although they remain of course our first priority. To reiterate, Europe needs a more mobile labour market. To that end, the way students and academics move around the single market as a matter of course could be better reflected among skilled workers."

Last week Europe earmarked an extra €6bn to tackle youth unemployment. However, Merkel said: "Money alone won't be enough. We will need intelligent reform."

She stressed that contrary to widespread accusations that Germany was trying to impose its ideals and economic models on souther European countries, she did not expect everyone to conform to the strict German model.

"It's absolutely fine for a country to want to structure its economy in a completely different way to Germany's," she said. "I'm always pleased to see different roads leading to success. But what nobody can negate is the need to be competitive and to work for and earn prosperity. When I look at Italy, Spain or Greece I do see very different, successful industries.

"What is crucial is that we all realise how much the world has changed. China, India, Brazil, South Korea and many other countries have been competing with us [Europe] for quite some time in areas we used to dominate … We either offer those parts of the world attractive and innovative products, or we resign ourselves to losing market shares and therefore prosperity, which is precisely what I do not want, either for Germany or for Europe".

Speaking on the sixth floor in the cuboid chancellery in Berlin, with its sweeping views over the Tiergarten park and the sea of cranes that continue to reconstruct the German capital almost 23 years since reunification, Merkel said it was up to governments to solve the problems so as to prevent the social unrest that has been increasingly visible on the streets of southern European towns and cities in recent years.

"When things start to become dysfunctional, it is the job of politicians to remedy the situation. Youth unemployment has been much too high in some countries for many years and now the crisis has driven it even higher. That is unsustainable in a continent with an ageing population. We must not allow there to be a lost generation".

Merkel said the plight of young people was one of her major regrets about the crisis. "I am sorry that it is often those who had absolutely nothing to do with those wrong turnings, the young or the poor, who bear the brunt of the hardship today … It is highly regrettable that parts of the economic elite assume so little responsibility for the deplorable situation."

Highlighting another cultural difference between the approaches taken to the crisis by Germany and other parts of Europe, Merkel said the word "austerity" had entered her vocabulary for the first time only after the crisis had been well under way, as she preferred the term "sound budgeting".

"I see no dichotomy between sound budgeting and growth," she said. "The road we have now started on is therefore the right one, with budget consolidation on one side and fundamental structural reform on the other. That is what will bring sustainable growth."

Asked whether she had ever personally faced the worry of being out of work, Merkel – the daughter of a protestant pastor who moved his family to communist East Germany when she was six weeks old – said: "Fortunately not. In the first few years when I became a politician, I did sometimes think about what I would do if my political career suddenly came to an end.

"I imagined running a jobcentre," she said. "It's a pleasant task to help people find work."

She said her experience as an MP since 1990 in the northern state of Mecklenburg-Vorpommern, where the unemployment rate has dropped from 25% to 10% in recent years, had taught her how important it was to have experienced advisers on hand helping young people on a local level. "The [young people] need both to be given hope and to be pushed into investing their own energies … that can't be done centrally by Madrid or Berlin."

So has she now, on a far grander scale than she might ever have imagined, finally fulfilled her wish by becoming Europe's jobs tsar?

"No," she answered, appearing faintly annoyed by the question. "My task is to set the right political course in Germany and alongside my colleagues in Europe."

• This article was amended on 3 July 2013. The original referred to twenty European Union heads of state rather than heads of government. This has been corrected.