I would personally say that 'merit' is mainly used for good things and not bad things, whereas 'deserve' can be used for both good and bad things. I would therefore probably use deserve in your sentence above, although I would not go as far as to say that 'merit' would be wrong
I personally would use 'merit' for something like an award, a prize, recognition etc.
I feel that merit is also a little more formal than deserve, I would never use merit informally. Again that's more of a feeling though.