BERLIN (Reuters) - German Chancellor Angela Merkel on Wednesday underscored her government's commitment to strengthening NATO's eastern flank, days after her foreign minister warned against "saber-rattling" that could escalate tensions with Russia.

Merkel said Germany would continue to do engage in regular dialogue with Russia but also saw "new threats" close to Europe, and was determined to both increase its own military spending and strengthen the NATO alliance.

"The (German coalition) government as a whole has agreed to the NATO decision that over the longer term we should dedicate 2 percent of gross domestic product to defense spending," she told a news conference after a meeting with Polish officials.

"I think that will be supported by everyone in the government ... That is the position of the government."

Merkel's comment came three days after Foreign Minister Frank-Walter Steinmeier sparked a firestorm with remarks that cautioned against antagonizing Russia.

"What we shouldn't do now is to inflame the situation by loud saber-rattling and shrill war cries," he told Bild newspaper.

"Whoever believes that symbolic tank parades on the alliance's eastern border will bring more security is mistaken," Steinmeier said. "We are well-advised not to create pretexts to renew an old confrontation."

A spokesman for Steinmeier on Tuesday denied the remarks were linked directly to NATO exercises and plans to increase NATO troop levels in eastern Europe.

Steinmeier's remarks revealed growing divisions between his left-leaning Social Democrats and Merkel's conservative Christian Democrats in Germany's coalition government.

Germany is set for a federal election next year.

Steinmeier spoke in a parliamentary debate on Wednesday to mark the anniversary of Germany's invasion of the Soviet Union.

"When the security situation changes - and it has - then we have to adapt our military capabilities. But we cannot at the same time fall prey to the illusion that military strength alone leads to security," he said.

Steinmeier has called for a gradual easing of European sanctions against Russia as it makes progress in implementing the Minsk peace deal for eastern Ukraine, in contrast with Merkel's insistence that sanctions can only be lifted once the deal is fully implemented.

During Wednesday's debate, Steinmeier criticized Russia's annexation of the Crimea region of Ukraine, but said Germany could also never forget its own invasion of the Soviet Union 75 years ago.

Russian President Vladimir Putin marked the anniversary by saying Russia must boost its combat readiness in response to NATO's "aggressive actions" near its borders.

(Reporting by Andrea Shalal; editing by Andrew Roche)