The latest revelations that the U.S. National Security Agency swept up more than 70 million phone records in France and may have tapped Merkel's own cellphone brought denunciations from the French and German governments.
Merkel's unusually stern remarks as she arrived at the European Union gathering indicated she wasn't placated by a phone conversation she had Wednesday with President Barack Obama, or his personal assurances that the U.S. is not listening in on her calls now.
"We need trust among allies and partners," Merkel told reporters in Brussels. "Such trust now has to be built anew. This is what we have to think about."
"The United States of America and Europe face common challenges. We are allies," the German leader said. "But such an alliance can only be built on trust. That's why I repeat again: spying among friends, that cannot be."
The White House may soon face other irked heads of state and government. The British newspaper The Guardian said Thursday it obtained a confidential memo suggesting the NSA was able to monitor 35 world leaders' communications in 2006. The memo said the NSA encouraged senior officials at the White House, Pentagon and other agencies to share their contacts so the spy agency could add foreign leaders' phone numbers to its surveillance systems, the report said.
The Guardian did not identify who reportedly was eavesdropped on, but said the memo termed the payoff very meager: "Little reportable intelligence" was obtained, it said.
Other European leaders arriving for the 28-nation meeting echoed Merkel's displeasure. Swedish Prime Minister Fredrik Reinfeldt called it "completely unacceptable" for a country to eavesdrop on an allied leader.
If reports that Merkel's cellphone had been tapped are true, "it is exceptionally serious," Dutch Prime Minister Mark Rutte told national broadcaster NOS.
"We want the truth," Italian Premier Enrico Letta told reporters. "It is not in the least bit conceivable that activity of this type could be acceptable."
Echoing Merkel, Austria's foreign minister, Micheal Spindelegger, said, "We need to re-establish with the U.S. a relationship of trust, which has certainly suffered from this."
France, which also vocally objected to allies spying on each other, asked that the issue of reinforcing Europeans' privacy in the digital age be added to the agenda of the two-day summit. Before official proceedings got underway, Merkel held a brief one-on-one with French President Francois Hollande, and discussed the spying controversy.
The Europeans' statements and actions indicated that they hadn't been satisfied with assurances from Washington. On Wednesday, White House spokesman Jay Carney said Obama personally assured Merkel that her phone is not being listened to now and won't be in the future.
"I think we are all outraged, across party lines," Wolfgang Bosbach, a prominent German lawmaker from Merkel's party, told Deutschlandfunk radio. "And that also goes for the response that the chancellor's cellphone is not being monitored - because this sentence says nothing about whether the chancellor was monitored in the past."
"This cannot be justified from any point of view by the fight against international terrorism or by averting danger," Bosbach said.
Asked Thursday whether the Americans had monitored Merkel's previous communications, White House spokesman Jay Carney wouldn't rule it out.
"We are not going to comment publicly on every specified alleged intelligence activity," he said.
But while the White House was staying publicly mum, Carney said the Obama administration was discussing Germany's concerns "through diplomatic channels at the highest level," as it was with other U.S. allies worried about the alleged spying.
In the past, much of the official outrage in Europe about revelations of U.S. communications intercepts leaked by former NSA contract worker Edward Snowden seemed designed for internal political consumption in countries that readily acknowledge conducting major spying operations themselves. But there has been a new discernible vein of anger in Europe as the scale of the NSA's reported operations became known, as well as the possible targeting of a prominent leader like Merkel, presumably for inside political or economic information.
"Nobody in Germany will be able to say any longer that NSA surveillance - which is apparently happening worldwide and millions of times - is serving solely intelligence-gathering or defense against Islamic terror or weapons proliferation," said Hans-Christian Strobele, a member of the German parliamentary oversight committee.
"Because, if you tap the cellphone or the phone connection of the presidents of France or Brazil, or the cellphone of the chancellor, then this is no longer about collecting intelligence about international terrorism, but then that is about competition, about getting advantages in this competition and winning. That's why today is a watershed moment."
Martin Schulz, president of the European Parliament, said Europe's undermined confidence in the U.S. meant it should suspend negotiations for a two-way free-trade agreement that would account for almost half of the global economy. The Americans, Schulz said, now must prove they can be trusted.
"Let's be honest. If we go to the negotiations and we have the feeling those people with whom we negotiate know everything that we want to deal with in advance, how can we trust each other?" Schulz said.
European Union Commission President Jose Manuel Barroso said for many Europeans, eavesdropping on their phone calls or reading their emails is particularly objectionable because it raises the specter of totalitarian regimes of the recent past.
"At least in Europe, we consider the right to privacy a fundamental right and it is a very serious matter. We cannot, let's say, pretend it is just something accessory," Barroso told a presummit news conference.
Referring to the East German Communist secret police, the feared Stasi, Barroso said, "to speak about Chancellor Merkel, in Germany there was a part of Germany where there was a political police that was spying on people's lives every day. So we know very recently what totalitarianism means. And we know very well what comes, what happens when the state uses powers that intrude in people's lives. So it is a very important issue, not only for Germany but for Europe in general."
In Berlin, the German Foreign Ministry summoned the U.S. ambassador to stress how seriously it takes the reported spying on Merkel. Germany's defense minister said his country and Europe can't return "to business as usual" with Washington, given the number of reports that the United States has eavesdropped on allied nations.
"The Americans are and remain our best friends, but this is absolutely not right," Thomas de Maiziere, who served as Merkel's chief of staff, told ARD television. "I have reckoned for years with my cellphone being monitored, but I wasn't reckoning with the Americans."
A German parliamentary committee that oversees the country's intelligence service met to discuss the spying allegations. Its head, Thomas Oppermann, recalled previous reports to the panel that U.S. authorities had denied violating German interests, and said, "we were apparently deceived by the American side."
Moulson reported from Berlin. Associated Press writers Raf Casert and Juergen Baetz in Brussels, David Rising in Berlin, Cassandra Vinograd in London and Josh Lederman in Washington contributed to this report.