Linus Torvalds thinks that Git is already better at merging than everything else. In the sense that Linus personally has a magic merge algorithm knows as 'Andrew Morton' that's correct, but for everybody else this claim is completely false. (I asked around about what he could mean, and some people suggested that 'better' might have meant 'faster', which is the only explanation which doesn't involve Linus being delusional or lying.)
Unfortunately Linus's stated plans for Git are that it should only ever have whole tree three way merging (because that's the simple, practical, expedient way) and that it will have implicit renames and moves of lines between files (because that's the 'right' way). The resulting approach isn't workable even on paper. Whether the plans will be changed in advance of a disaster remains to be seen.
Meanwhile, we recently made a big advance in merge algorithms, you can read the latest about the upcoming new Codeville merge algorithm in this post.