Germany's former intelligence chief says Merkel 'was really upset' about U.S. surveillance. NSA disclosures put U.S. on defense

The NSA spying controversy is quickly transforming from a domestic headache for the Obama administration into a global public relations fiasco for the United States government.

After months of public and congressional debate over the National Security Agency’s collection of details on U.S. telephone calls, a series of reports about alleged spying on foreign countries and their leaders has unleashed an angry global reaction that appears likely to swamp the debate about gathering of metadata within American borders.


While prospects for a legislative or judicial curtailment of the U.S. call-tracking program are doubtful, damage from public revelations about NSA’s global surveillance is already evident and seems to be growing.

( WATCH: W.H. won't say if it has tapped Angela Merkel's phone)

Citing the snooping disclosed by former NSA contractor Edward Snowden, Brazil’s president canceled a state visit to the U.S. set for this week. Leaders in France and Italy and Germany have lodged heated protests with Washington, with the Germans announcing plans to dispatch a delegation to Washington to discuss the issue. Boeing airplane sales are in jeopardy. And the European Union is threatening to slap restrictions on U.S. technology firms that profit from tens of millions of users on the Continent.

“Europe is talking about this. Some people in Europe are upset and may take steps to block us,” former Rep. Jane Harman (D-Calif.) said in a telephone interview from Rome on Friday. “The reaction of retail politicians is to mirror the upset of the people who elected them.”

“Confidence between countries and confidence between governments are important and sometime decisive and there’s almost no confidence between the United States of America and Europe” now, former German intelligence chief Hansjörg Geiger said. “I’m quite convinced there will be an impact…. It will be a real impact and not only the [intelligence] services will have some turbulence.”

( Also on POLITICO: France is latest U.S. ally angered by NSA snooping)

Some analysts see immediate trouble for U.S.-European arrangements to share information about airline passengers, financial transactions and more.

“The bigger problems are not in Berlin or Paris, but in the future out of Brussels,” said Michael Leiter, former head of the National Counterterrorism Center. “At the EU, I expect them to be very, very resistant to any increase — and to have problems even with maintenance—of some of the information sharing we have now…..All of this complicates those discussions exponentially.”

Leiter said the issues with Germany and France will likely pass, but that U.S. efforts to boost ties with rising powers could be rocky for some time. “It’s much more troublesome for rapidly emerging powers like Brazil,” he said. “They’re critical partners and we don’t have the same long-term, deep national security ties and I think this really does make it hard for us.”

( Also on POLITICO: Brazilian president: U.S. surveillance 'a breach of international law')

Some analysts say the slow-to-build but intensifying damage overseas was predictable, but not really avoidable because of the legal structure the U.S. uses for vacuuming up communications. While the effectiveness of the controls are debated, collection of intelligence on U.S. soil and about U.S. citizens is regulated by the courts and by intelligence agency policies. Foreigners outside the U.S. are basically considered fair game for American intelligence agencies, with no legal restrictions and few other limits.

The early U.S. discussion “very much emphasized the protection of American rights and interests,” said Juan Zarate, a deputy national security adviser under President George W. Bush. “The natural follow-on question is: What about everybody else?”

The impacts could be felt by the U.S in diplomatic circles and if foreign intelligence services rein in their cooperation. Another potential outcome: President Barack Obama may decide to pledge to stop spying on certain targets, like close allies, or for certain purposes, like gaining advantage in diplomatic negotiations.

( WATCH: Marco Rubio on NSA foreign spying: Everyone spies on everyone)

“The real question is whether the administration here feels constrained not just to review our collection, but to start to constrain it to be able to contain the diplomatic fallout,” said Zarate, author of “Treasury’s War.” “If we’re really going to constrain what we’re doing, that to me is a long-term implication of all of this.”

Indeed, Obama already seems to be moving in that direction.

After fielding angry complaints from German Chancellor Angela Merkel about alleged NSA monitoring of her cell phone, Obama pledged to stop such activity, even as he demurred publicly about whether it had taken place.

“The president assured the chancellor that the United States is not monitoring and will not monitor the communications of the chancellor,” White House press secretary Jay Carney told reporters Wednesday.

Geiger said Friday that Merkel seemed genuinely disturbed by the alleged tapping of her phone. “Chancellor Merkel was really upset,” Geiger told POLITICO. “The reaction was absolutely un-normal for her. She’s always very calm.”

Geiger said that before recent reports he would have dismissed as “nonsense” the idea that the U.S. would try to listen to Merkel’s phone.

“You have to divide between friends and enemies,” he said. “This kind of behavior regarding friends is not acceptable.”

Still, some former U.S. officials said they were surprised by Obama’s public pledge to Merkel, since it is likely to generate pressure from other foreign leaders for similar assurances.

French President François Hollande told reporters Friday he’d received a similar assurance from U.S. officials.

”They told us it was in the past and now there’s a will to organize things differently,” Hollande said, according to the Associated Press.

Obama’s pledges, if broadened to other nations or less senior officials, could create complications in situations where the U.S. suspects foreign government officials could be complicit in wrongdoing.

However, Harman said she believes it would be reasonable for Obama to limit diplomatic spying in order to preserve cooperation with the U.S. internationally on issues like terrorism.

“I commend the president for saying we need to review this…. I think there should be a line,” she said. “It’s important in our interconnected world for leaders of countries to trust each other.”

Harman, now head of the Wilson Center, also stressed that NSA anti-terror surveillance is often used by foreign countries to head off attacks on their soil.

The White House acknowledged this week that the NSA revelations have roiled U.S. ties with partners around the globe, but disputed the seriousness of the setbacks. “We have diplomatic relations and channels that we use in order to discuss these issues that have clearly caused some tension in our relationships with other nations around the world,” Carney said.

But Deputy National Security Adviser Ben Rhodes downplayed that tumult. “I don’t think you can say there’s been some across-the-board impact on American foreign policy. I think it’s been very unique to some circumstances,” Rhodes said Thursday at a conference sponsored by Reuters.

While there are no legal limits on the NSA’s collection of communications by foreigners outside the U.S. who lack a U.S. green card, former senior intelligence officials said there are “political” constraints — decisions not to undertake certain work because it could irritate allies or is seen as unsavory.

National Security Agency director Gen. Keith Alexander hinted this week that such moves have already been made and there may be more to come.

“We’re taking this beating in the press because of what these reporters are putting out…Would I stop doing any of that” surveillance? Alexander said in an interview with a Defense Department blog. “Well, there’s policy decisions that policymakers can do, but nobody would ever want us to stop protecting this country against terrorists, against adversary states, against cyber.”

The NSA director, who has been unflappable in public during the storm and genial with journalists, sounded increasingly frustrated with the serial disclosures.

“I think it’s wrong that that newspaper reporters have all these documents, the 50,000 — whatever they have and are selling them and giving them out as if these — you know it just doesn’t make sense,” Alexander said. “We ought to come up with a way of stopping it. I don’t know how to do that. That’s more of the courts and the policymakers but, from my perspective, it’s wrong to allow this to go on.”

With the government shutdown out of the way at least until January, the NSA story seems likely to jump back into Washington headlines in the coming weeks.

Anti-surveillance protesters are planning a march and rally in the capital on Saturday. Congress is turning its attention back to the issue, too, with a House hearing set for next week and Senate panels likely to take up reform legislation soon.

Outside panels are grinding away on the issue as well. The surveillance technology review group Obama announced in August is set to produce an interim report in mid-November. And next week the separate Privacy and Civil Liberties Oversight Board is set to have an all-day public hearing on potential reforms.

Not all intelligence veterans believe the current outcry over U.S. intelligence gathering will last.

“This will not be permanent damage,” said John McLaughlin, a former CIA deputy director now at the School of Advanced International Studies. “Everyone is going to seek to put this behind us.”

Like many colleagues, McLaughlin charged that much of the global outrage — especially that from political leaders — is contrived.

“This is what governments have done since biblical times,” he said. “It reminds me of the line in Casablanca about there being gambling going on in the casino.”