Obama: making friends and influencing people in his own inimitable way

US spying row to dominate EU summit

EU summit debates proposals to enforce European data protection laws on the US in the wake of allegations America bugged Angela Merkel's mobile

A European Union summit in Brussels on Thursday will be overshadowed by new allegations that the US spied on Angela Merkel and French demands for the American intelligence services to be shackled by Europe's data protection laws.

The German Chancellor, who is famous for her reliance on her mobile telephone, called President Barack Obama last night to protest over claims that America had tapped it, allegations that the White House was unable to deny in terms of past activity.

Thomas de Maiziere, Germany's defence minister, warned this morning that the implications for Transatlantic relations would be "really bad" if it was confirmed that the US had eavesdropped on Chancellor Merkel's mobile.

"We can't simply return to business as usual. There are allegations in France too," he said.

"I have reckoned for years with my cellphone being monitored, but I wasn't reckoning with the Americans."

Francois Hollande, the French President, phoned Mr Obama earlier this week to protest that the US National Security Agency had collected tens of thousands of phone records in France during a single month between December 2012 and January 2013.

The French president, the European Commission and other countries want the US to be called to account over allegations of spying based on material said to originate from Edward Snowden, a fugitive former contractor for American intelligence.

"The most recent spying scandals show: Data protection must apply to everyone - whether we are taking about citizens' emails or Angela Merkel's mobile phone," said Viviane Reding, the EU's justice commisisoner.

"We now need big European rules to counter big fears of surveillance." This would be Europe's declaration of independence. Only then can Europe credibly face the US."

France is backing Brussels proposals for EU data protection laws to be imposed on American companies and for new taxes on companies, such as Google, in a bid for Europe tries to wrest economic control of the internet away from America.

The commission, backed by the European Parliament, has tabled legislation that would punish American, or other companies, sharing information with the American intelligence services with massive fines of up to 5 per cent of global revenue.

In order to challenge American economic domination of the internet, the French have also tabled a proposal for an international data transfer levy modelled on the controversial financial transaction tax.

This German position is now expected to shift amid public anger of the "affront" caused by revelations that America had in the recent past spied on Germany's leader.

The "Google tax" plan is opposed by Britain on the grounds of national sovereignty over taxation and British officials are concerned over EU moves to encroach on security and intelligence matters using internet data protection as a pretext.

Fran Burwell, a vice president at the Atlantic Council, a Washington policy group, told Bloomberg that the latest scandal could torpedo EU-US trade talks and would bring back unpleasant memoroes for Mrs Merkel who grew up in Communist East Germany.

"This has very bad resonance. When Angela Merkel speaks about this, she grew up with the Stasi," she said.

The issue of tax and Transatlantic spying scandals has become bound up with a package of wider EU data protection legislation from the European Commission amid Government concerns that the new requirements will tie small businesses up in red tape.

"At the summit today, Europe's heads of state and government must follow words with action: They should commit to adopting the EU data Protection reform by spring 2014," said Mrs Reding. "Europe needs to stand tall and united with one law, rather than being dwarfed by 28 different ones."

Germany and Mrs Merkel have previously been hostile on the data protection and taxation demands despite strong support for them in the German telecommunications industry.

Der Spiegel magazine has reported that US intelligence may have been monitoring the German Chancellor's private mobile phone for years during a time when Germany has been at loggerheads with America over military intervention in Libya.