While firmly rejecting Erdogan's claims as "absurd and out of place", Merkel's office sought to draw a line under a dispute that is further fraying ties between the two countries.
Seibert said Germany would continue to allow Turkish politicians to speak in Germany about a referendum on expanding Erdogan's powers, as long as they were open about their intentions and did not import Turkish conflicts to Germany.
Luxembourg foreign minister Jean Asselborn said that "normally you would have to think that democracy is strong enough to cope with this".
German authorities withdrew permission for two meetings in German cities last week that were part of the Turkish government's campaign to win the Turkish community's support for next month's referendum on the constitution in Turkey.
The German authorities cited capacity problems in hosting the events, which they said were likely to attract large crowds.
Dutch nationalist Geert Wilders, expected to make huge gains in a March 15 election, said on Sunday that he would declare "the whole cabinet of Turkey persona non grata" and described Erdogan an "Islamo-fascist".
German Foreign Ministry spokesman Martin Schaefer responded that the federal government had nothing to do with the cancellations, and suggested Turkish officials voicing their irritation in the press was in "nobody's interest" and simply "pouring oil onto the fire".
"Germany, you are not even close to democracy", Erdogan said on Sunday at a rally in Istanbul.
He also warned Germany not to hinder him from making an appearance if he wished.
Police are searching the city hall.
"It is our duty to go to battle; victory belongs to Allah", the state-run Anadolu Agency quoted Zeybekci as saying.
His supporters, who are also campaigning online, fear he could be held for up to five years before a trial.
Bozdag canceled a meeting with his German counterpart and flew back to Turkey. Germany, home to over 3 million out of 5 million people of Turkish origin in Europe, is a key factor in the political campaign.
Roughly 1.4 million Turks residing in Germany are eligible to vote in the April referendum and are considered to be a valuable voting bloc.
Ankara's relations with Berlin have soured especially since the attempted coup in July where Turkey said west European countries had failed to condemned the military putschists quickly and emphatically enough.