Merkel first raised the possibility of a 'no-spying' agreement with Obama during a visit to Berlin in June this year, but nothing came of it. The latest revelations, part of the vast leaks made by former U.S. data analyst Edward Snowden, would appear to have renewed her determination for a pact.
The United States already has a similar deal with Britain, Australia, New Zealand and Canada, an alliance known as 'Five Eyes' that was struck in the aftermath of World War Two.
But there has traditionally been a reluctance to make similar arrangements with other allies, despite the close relations that the United States and Germany now enjoy.
Merkel said an accord with Washington was long overdue, given the shared experiences the countries face.
"We are in Afghanistan together. Our soldiers experience life threatening situations. They sometimes die in the same battles," she said.
"The friendship and partnership between the European member states, including Germany, and the United States is not a one-way street. We depend on it. But there are good reasons that the United States also needs friends in the world."
As EU leaders arrived for the two-day summit there was near-universal condemnation of the alleged activities by the NSA, particularly the monitoring of Merkel's mobile phone.
Some senior German officials, and the German president of the European Parliament, have called for talks between the EU and United States on a free-trade agreement, which began in July, to be suspended because of the spying allegations.
Merkel, whose country is one of the world's leading exporters and stands to gain from any trade deal with Washington, said that was not the right path to take, saying the best way forward was to rebuild trust.
The series of Snowden-based leaks over the past three months have left Washington at odds with a host of important allies, from Brazil to Saudi Arabia, and there are few signs that the revelations are going to dry up anytime soon.
The Guardian newspaper reported on Thursday that one NSA contact, a U.S. official, had provided the telephone numbers of 35 world leaders that had then been monitored.
The White House refused to address the disclosures, saying: "We are not going to comment publicly on every specific alleged intelligence activity, and as a matter of policy we have made clear that the United States gathers foreign intelligence of the type gathered by all nations."
The rift between Washington and Berlin presents a dilemma for David Cameron, who could be forced to choose between his greatest ally, the US, and a German chancellor who is his key partner in attempts to reform the EU.
In marked contrast to other European leaders, Mr Cameron's official spokesman tried to play down the row ahead of the meeting, insisting that the matter was only a "bilateral issue" which would not derail the vital trade talks between the EU and the US.
"There may be bilateral issues that individual countries raise between themselves but in terms of the EU-US free trade agreement this is a multinational thing and I certainly would not see a connection between those two," he said.
Nina Schick, of the Open Europe think-tank, said: "This puts Cameron in a difficult position. The EU-US trade negotiations, in which the UK is investing lots of political capital, could end up as collateral damage in this spat."
The Prime Minister left the meeting last night without making any comment.
As well as raising questions about the EU-US trade negotiations, the spying furore could also have an impact on data-privacy legislation working its way through the EU.
The European Parliament this week backed legislation, proposed by the European Commission in early 2012, that would greatly toughen EU data protection rules dating from 1995.
The new rules would restrict how data collected in Europe by firms such as Google and Facebook is shared with non-EU countries, introduce the right of EU citizens to request that their digital traces be erased, and impose fines of 100 million euros (£90 million) or more on rule breakers.
The United States is concerned the regulations, if they enter into law, will raise the cost of handling data in Europe. Google, Yahoo!, Microsoft and others have lobbied hard against the proposals.
Given the spying accusations, France and Germany – the two most influential countries in EU policy – may succeed in getting member states to push ahead on negotiations with the parliament to complete the new data regulations by 2015.
For the United States, it could substantially change how data privacy rules are implemented globally.
Edited by Steve Wilson
The United States already has a similar deal with Britain, Australia, New Zealand and Canada, an alliance known as 'Five Eyes' that was struck in the aftermath of World War Two.
But there has traditionally been a reluctance to make similar arrangements with other allies, despite the close relations that the United States and Germany now enjoy.
Merkel said an accord with Washington was long overdue, given the shared experiences the countries face.
"We are in Afghanistan together. Our soldiers experience life threatening situations. They sometimes die in the same battles," she said.
"The friendship and partnership between the European member states, including Germany, and the United States is not a one-way street. We depend on it. But there are good reasons that the United States also needs friends in the world."
As EU leaders arrived for the two-day summit there was near-universal condemnation of the alleged activities by the NSA, particularly the monitoring of Merkel's mobile phone.
Some senior German officials, and the German president of the European Parliament, have called for talks between the EU and United States on a free-trade agreement, which began in July, to be suspended because of the spying allegations.
Merkel, whose country is one of the world's leading exporters and stands to gain from any trade deal with Washington, said that was not the right path to take, saying the best way forward was to rebuild trust.
The series of Snowden-based leaks over the past three months have left Washington at odds with a host of important allies, from Brazil to Saudi Arabia, and there are few signs that the revelations are going to dry up anytime soon.
The Guardian newspaper reported on Thursday that one NSA contact, a U.S. official, had provided the telephone numbers of 35 world leaders that had then been monitored.
The White House refused to address the disclosures, saying: "We are not going to comment publicly on every specific alleged intelligence activity, and as a matter of policy we have made clear that the United States gathers foreign intelligence of the type gathered by all nations."
The rift between Washington and Berlin presents a dilemma for David Cameron, who could be forced to choose between his greatest ally, the US, and a German chancellor who is his key partner in attempts to reform the EU.
In marked contrast to other European leaders, Mr Cameron's official spokesman tried to play down the row ahead of the meeting, insisting that the matter was only a "bilateral issue" which would not derail the vital trade talks between the EU and the US.
"There may be bilateral issues that individual countries raise between themselves but in terms of the EU-US free trade agreement this is a multinational thing and I certainly would not see a connection between those two," he said.
Nina Schick, of the Open Europe think-tank, said: "This puts Cameron in a difficult position. The EU-US trade negotiations, in which the UK is investing lots of political capital, could end up as collateral damage in this spat."
The Prime Minister left the meeting last night without making any comment.
As well as raising questions about the EU-US trade negotiations, the spying furore could also have an impact on data-privacy legislation working its way through the EU.
The European Parliament this week backed legislation, proposed by the European Commission in early 2012, that would greatly toughen EU data protection rules dating from 1995.
The new rules would restrict how data collected in Europe by firms such as Google and Facebook is shared with non-EU countries, introduce the right of EU citizens to request that their digital traces be erased, and impose fines of 100 million euros (£90 million) or more on rule breakers.
The United States is concerned the regulations, if they enter into law, will raise the cost of handling data in Europe. Google, Yahoo!, Microsoft and others have lobbied hard against the proposals.
Given the spying accusations, France and Germany – the two most influential countries in EU policy – may succeed in getting member states to push ahead on negotiations with the parliament to complete the new data regulations by 2015.
For the United States, it could substantially change how data privacy rules are implemented globally.
Edited by Steve Wilson