The visit is the first by a German leader since the 2004 Orange Revolution brought a pro-Western government to power in Ukraine. Since Ukraine's Orange Revolution moved the country closer to the West, German leaders have been wary about openly embracing Kyiv out of fear of provoking Russia.
High on Merkel's agenda is Ukraine's bid to join the European Union and NATO.
Speaking at a joint news conference after the talks, Yushchenko expressed his hope that Ukraine would soon have a new agreement with Brussels.
"We are saying that we will be able to sign the political part of an Enhanced Agreement [with the European Union] in the city of Evian this year," Yushchenko said. "The remainder of the time will be devoted to continuing talks on the formation of a free-trade zone between Ukraine and the European Union. I expect that in the coming 10 to 12 months, we will conclude our talks on the economic part of these issues, as well."
The EU and Ukraine signed a three-year Action Plan in 2005 and are currently negotiating a new long-term bilateral agreement that will be linked to a comprehensive free trade pact. French President Nicolas Sarkozy, whose country holds the EU's rotating presidency, says negotiations should be completed by the beginning of next year.
Speaking to RFE/RL's Ukrainian Service, Oleksandr Sushko, director of the Institute for Peace, Conversion and Foreign Policy, says Germany's role in those negotiations will be crucial.
"Tomorrow (July 22), the European Council will discuss the negotiations process with Ukraine and the prospective signing of a New Enhanced Agreement, as well as the issues that will be discussed at Ukraine-EU summit in September," Sushko says. "In this sense, Germany's position is very important. Because Ukraine wants the new agreement to be an Association Agreement with the possibility of future membership and a visa-free travel regime."
Awaiting EU, NATO Offers
The latest wave of EU members -- Poland, the Czech Republic, and others -- all began their road to EU accession with a so-called Association Agreement. Ukraine would like to follow that model. The EU has so far been coy about offering a clear pledge of eventual membership prospects.
Ukraine is also waiting to see if it will receive a NATO Membership Action Plan (MAP). At the alliance's summit in Bucharest in April, NATO leaders deferred granting MAPs to Georgia and Ukraine until a meeting of the alliance's foreign ministers in December.
Russia staunchly opposes Ukraine's NATO bid. Germany, like France, is wary of antagonizing Moscow and has been reluctant to advance Kyiv's bid to join the Atlantic alliance. The United States, Great Britain, Poland, and other new NATO members from Eastern Europe support Ukraine's NATO bid.
Talks will also focus on bilateral issues, trade, and energy issues. Germany is Kyiv's second-largest trading partner after Russia, and a key transit country for Russian energy exports to Europe. The EU imports 80 percent of its natural gas from Russia via Ukrainian territory.