Qatar's ruler Emir Sheikh Tamim bin Hamad Al Thani has denied accusations that his country funds the Islamic State in Iraq and Levant, telling Germany that his own country is threatened by the armed group.

Last month, a German minister accused Qatar of financing ISIL, and the US has expressed concern that funds from Arab states, including Kuwait, have helped the armed group that has taken over large swaths of Iraq and Syria.

What is happening in Iraq and Syria is extremism and such organisations are partly financed from abroad, but Qatar has never supported and will never support terrorist organisations. Emir Sheikh Tamim bin Hamad Al Thani

"What is happening in Iraq and Syria is extremism and such organisations are partly financed from abroad, but Qatar has never supported and will never support terrorist organisations," the emir said, speaking alongside Chancellor Angela Merkel.

Merkel said Al Thani had assured her Qatar's security was also jeopardised by the fight against the ISIL and that she had "no reason not to believe what the emir said".

Qatar has long faced criticism, including from neighbouring Gulf Arab states, of using its vast oil and gas wealth to back armed groups across the region.

German Development Minister Gerd Mueller said last month that Qatar was the "keyword" when it comes to IS financing. Berlin then had to apologise to Doha.

Qatar moved this week to regulate charity donations to tackle funding concerns and last week was one of 10 Arab states which agreed to do more to stop the flow of funds and fighters to ISIL - a move which Merkel said was welcome.

Economic cooperation

German and Qatari business leaders also met in Berlin and Merkel said Europe's largest economy appreciated that "Qatar is a strategic investor" that takes a long-term approach.

Qatar's ex-prime minister Sheikh Hamad Bin Jassim Bin Jabor al-Thani has a stake in Deutsche Bank, Qatar has a 17 percent stake in Volkswagen and Qatar Airways has ordered A380 superjumbos from Franco-German Airbus.

Merkel said she hoped cooperation would grow in energy, with "first steps" already taken in liquefied natural gas.

The emir was also due to meet German executives and Economy Minister Sigmar Gabriel, a Social Democrat who has this year put the brakes on sales of weapons to the Gulf state because of concerns over its support for armed groups.

As chancellor of the reigning World Cup soccer champions, Merkel also raised media reports of bad working conditions and fatal accidents among thousands of foreign workers who are preparing the 2022 World Cup which Qatar will host.

"I made it very clear we want good conditions for guest workers in one of the world's rich countries," she said. "The emir told me things will change and they will react to the criticisms."