T-SQL (SS2K8) :: Query Be Rewritten With Merge Statement So That Whole Operation Is Atomic?

I would like to have a 'counter' table which will hold the last used number and return a new number. This is my schema:

if object_id('tempdb.dbo.#Counter', 'u') is not null drop table #Counter
go
create table #Counter (
Id int not null
)
go
if exists (select * from #Counter)
update #Counter
set Id = Id + 1
output inserted.Id
else
insert into #Counter (Id)
output inserted.Id
select 1

If the table is empty it returns 1 else it returns the next number (Id + 1). But this query is not atomic (i guess...?) so it could evaluate that the #Counter table is empty and then try to insert into the table, but inbetween someone else executes the insert also. Could this query be rewritten with the merge statement so that the whole operation is atomic?