German diminutive of Margarethe (Margaret), meaning "pearl."
Grethel is an archaic German diminutive of Margarete, itself from the Greek "margarites," meaning pearl. The diminutive path runs through Grete → Gretel → Grethel, the final form preserving an older spelling that was common in early modern German-speaking regions before standardization compressed it to the now-familiar Gretel. Margaret — and all her diminutives — was among the most popular women's names in medieval Europe, sustained by devotion to Saint Margaret of Antioch, patron of childbirth, whose legend spread from the eastern Mediterranean to the British Isles and deep into Germany.
Grethel's immortality, of course, belongs to the Brothers Grimm. In their 1812 collection of fairy tales, Hansel and Gretel — spelled in older manuscripts as Hänsel und Grethel — became one of the most-read stories in the world: two children abandoned in a forest, a gingerbread house, a witch's oven, and a girl's fierce, lifesaving cunning. Jacob and Wilhelm Grimm collected and refined the tale from oral traditions in Hesse, and Grethel's spelling in those early editions preserves the domestic, peasant-world authenticity the brothers were reaching for.
Engelbert Humperdinck's 1893 opera adaptation brought the story — and the name — to concert halls across Europe. As a given name for real children, Grethel is exceptional to the point of near-invisibility today, which makes it an audacious choice. It carries fairy-tale weight without quite becoming costume — distinguished from the more recognizable Gretel by that final "h," a tiny orthographic detail that signals a deliberate, historically-minded choice.