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Arsenal are without a win in three league games after they were held to a 0-0 draw by West Ham last night.
It means Arsenal are closer in terms of points to the bottom of the table than Manchester City at the top.
And Wenger’s side has won just nine points from a possible 27 away from the Emirates.
Although Arsenal are still in the fight for a top-four finish, they face a battle to ensure they don’t miss out on the Champions League for the second consecutive year.
And Merson was scathing in his assessment of his former club.
He told Sky Sports: “Nothing has changed at Arsenal. We are 17 games into the season and they are below Burnley. That is embarrassing.
“You can understand after five or six games, if someone gets off to a flying start, but this is 17 games in.”
Merson then predicted Arsenal’s decline means contract rebels Alexis Sanchez and Mesut Ozil will leave the club.
He said: “I don’t know where Arsenal are going. I have said before that Alexis Sanchez and Mesut Ozil will probably stay but now I think they have to go because they are doing nothing.”
Arsenal have a chance to get back to winning ways on Saturday against Newcastle and Merson believes the Magpies are ideal opponents.
He added: “If they could have handpicked any team to play it would be Newcastle, who have completely gone.
“Why have Arsenal done well at home and not away? Because it’s easier to play at home.
“You have a lot of the ball and teams come and play a different way.
“The teams that win trophies go away from home and stand up and win games.”