Arriving for a two-day summit in Brussels on Thursday where the broad economic and social policy agenda has been overshadowed by allegations of eavesdropping by the US National Security Agency against Italy, France and Germany, Merkel said she had told President Barack Obama in a telephone conversation late on Wednesday that the acts were unacceptable.
"It's not just about me but about every German citizen. We need to have trust in our allies and partners, and this trust
must now be established once again," she told reporters.
"I repeat that spying among friends is not at all acceptable against anyone, and that goes for every citizen in Germany."
The stern words follow an announcement by the German government on Wednesday that it had seen evidence suggesting the chancellor's mobile was "monitored" by the NSA.
Germany's foreign minister has summoned the US ambassador to Berlin to discuss the issue, an event diplomats said had rarely happened in the past 60 years.
White House spokesman Jay Carney said Obama had assured Merkel in their telephone call that the United States "is not monitoring and will not monitor" her communications, leaving open the possibility that it had happened in the past.
The affair dredges up memories of eavesdropping by the Stasi secret police in the former East Germany, where Merkel grew up, and is an emotive topic for many Germans.
Following the unceasing flow of leaks by former US data analyst Edward Snowden, which revealed the reach of the NSA's
data-collection programmes, Washington finds itself at odds with a host of important allies, from Brazil to Saudi Arabia.
Germany's frustration follows outrage in France after Le Monde newspaper reported the NSA had collected tens of thousands of French phone records between December 2012 and January 2013, and an Italian news magazine reported on Thursday that the NSA had monitored sensitive Italian telecommunications.
The revelations could have an impact on major legislative and trade initiatives between the United States and the European Union, with some German lawmakers saying negotiations over an EU-US free-trade agreement should be suspended.
Merkel, who has previously discussed a "no spying" agreement with the United States, hinted that data-sharing deals with Washington may need to be relooked at, a potentially damaging blow for US efforts to collect counter-terrorism information.
"To this end, we need to ask what we need, which data security agreements we need, what transparency we need between the United States of America and Europe," Merkel said.
"We are allies facing challenges together. But such an alliance can only be built on the basis of trust."
Merkel and Hollande discussed the spying allegations one-to-one before the Brussels summit, with Hollande suggesting beforehand that he intended to put the issue formally on the agenda.
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