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A row over whether an ultra-conservative Salafist Muslim group should be allowed to hand out millions of free German translations of the Koran to non-Muslims had already raised tensions and threatened to overshadow the conference.
Adding to her remark, Kauder stressed that "Muslims belong to Germany. As state citizens, of course, they enjoy their full rights."
Germany is home to some 4 million Muslims, about half of whom have German citizenship. Many came from Turkey in the 1960s and 1970s and their hard work contributed to Germany's post-war economic miracle. Germany's total population is about 80 million.
While some people of Turkish origin have risen to prominent political and public positions, many others live in their own communities and studies show many youngsters struggle to learn German properly, limiting their chances of finding work.
In response to concerns about radicalization and aware of the potential boost a well-qualified cohort of young Muslims could give to Europe's biggest economy, Merkel set up forums six years ago to improve integration, a highly charged issue.
Two years ago a painful row erupted over a bestselling book by former central banker Thilo Sarrazin, who argued that Turkish and Arab immigrants sponged off the state and threatened Germany's culture.
Soon after, Germany's then-President Christian Wulff won wide praise from Muslims by saying Islam was part of Germany.
Thursday's conference is set to discuss the controversial distribution of the Koran by Salafists.
The group "The True Religion" has already handed out several hundred thousand copies on streets across Germany, drawing criticism from many in Merkel's conservative bloc, which is traditionally Catholic. The printer has now stopped printing the books.
Some Muslim groups have also criticized the Koran campaign but Kenan Kolat, the head of Turkish Communities in Germany, warned against hysteria. "If there is a glorification of violence, if there is an infringement of free, democratic basic values, then there are police measures that can be used," said Kolat.
Officially the Islam conference, comprising delegates from the federal and state governments and Islamic groups, will discuss questions such as forced marriage and the influence of Islamist groups on young people.
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