By Andrew Osborn

LONDON (Reuters) – Revelations of a huge, secret U.S. Internet spying program have raised awkward questions for allies, forced to explain whether they let Washington spy on their citizens or benefited from snooping that would be illegal at home.

U.S. officials have confirmed the existence of the secret program, codenamed PRISM, which according to documents leaked to the Washington Post and Britain’s Guardian newspaper has given them access to emails, web chats and other communications from companies such as Google, Facebook, Twitter and Skype.

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U.S. law puts limits on the government’s authority to snoop at home but virtually no restrictions on American spies eavesdropping on the communications of foreigners, including in allied countries with which Washington shares intelligence.

That means Washington could provide friendly governments with virtually unlimited information about their own citizens’ private communication on the Internet.

Britain’s foreign secretary took to television on Sunday to reassure Britons that London’s own spies had not circumvented laws restricting their own activity by obtaining information collected by Washington.

In Germany, sensitive to decades of snooping by East German Stasi secret police, the opposition said Chancellor Angela Merkel should do more to protect Germans from U.S. spying and demand answers when President Barack Obama visits this month.

In Australia, a government source said the U.S. revelations could make it more difficult to pass a law allowing the government to access Internet data at home.

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And in New Zealand, the revelations could cause further embarrassment for a government already forced to admit that it had illegally spied on an Internet file-sharing tycoon who is fighting extradition to the United States for computer piracy.

In Britain, which has forged the closest intelligence ties with Washington as the main U.S. battlefield ally in Iraq and Afghanistan, politicians asked whether access to data collected by Washington allowed London’s own eavesdropping service GCHQ to evade limits on its own snooping powers.

FEARS ARE “FANCIFUL”

Foreign Secretary William Hague would not say what information Britain received from the United States about British citizens but said it was “nonsense” that GCHQ would use cooperation with Washington to dodge British laws. He said he would answer questions on the subject on Monday in parliament.

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“The idea that in GCHQ people are sitting around working out how to circumvent a UK law with another agency in another country is fanciful,” Hague told BBC TV on Sunday.

“Of course we share a lot of information with the United States,” he said. “But if information arrives in the UK from the U.S., it’s governed by our laws.”

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Douglas Alexander, the opposition Labour party’s spokesman for foreign affairs, said Hague needed to be more open, adding: “It is vital that the Government now reassures people who are rightly concerned about these reports.”

In Germany, which has strong rules on privacy, the opposition said the government was responsible for preventing wholesale U.S. spying on Germans.

“No one has a problem with the USA keeping terrorists under surveillance – that has prevented terrorist attacks in Germany,” said Thomas Oppermann, a senior lawmaker from the opposition Social Democrats.

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“(But) total surveillance of all citizens by the USA is completely inappropriate. The German government must protect the privacy of Germans from the USA too.”

Renate Kuenast, a senior Greens lawmaker, told Reuters the affair “looks like it will be one of the biggest scandals in data sharing”.

“Merkel cannot just look away and act like nothing has happened,” Kuenast said.

In Australia, the conservative opposition, looking likely to win September elections, said it was “very troubled” by PRISM and concerned that Australians’ data could be accessed. The influential Greens party called on the government to clarify whether Australia’s own spy agencies had access to U.S. data.

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“We’ll examine carefully any implications in what has emerged for the security and privacy of Australians,” Foreign Minister Bob Carr said in a TV interview on Sunday, when asked whether Canberra had cooperated with the program.

DATA BILL IN DANGER

Australia’s spy and law-enforcement agencies want telecoms firms and Internet service providers to continuously collect and store personal data to boost anti-terrorism and crime-fighting.

The legislation has been the subject of almost three years of heated closed-door negotiations. One government source said the initiative would be even more difficult to push through now.

“I’m not sure what the legislative backing for events in the U.S. has been. We have tried here to do ours as transparently as possible, with all the headaches that brings. This will make that worse,” a government source told Reuters.

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In New Zealand, Internet file sharing tycoon Kim Dotcom, fighting extradition to the United States on charges of online piracy, said U.S. surveillance agencies played a role in illegal snooping by New Zealand’s security services in his own case.

Dotcom, born Kim Schmitz in Germany, is accused of helping to violate entertainment industry copyrights with his file sharing network Megaupload, once one of the most popular sites on the Internet for downloading movies and music.

The New Zealand government has acknowledged that its Government Communications and Security Bureau illegally bugged Dotcom’s communications before his house was raided in 2012 in the U.S. extradition case.

“The New Zealand GCSB spy agency was used to spy on my family because all surveillance was available to American agencies in real time,” Dotcom tweeted.

“My case against the spy agency in New Zealand will show the degree of cooperation with the NSA (U.S. National Security Agency),” he added.

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A New Zealand government spokeswoman declined to comment on Sunday when asked if the GCSB cooperated with the NSA program.

“We do not comment on security and intelligence matters. New Zealand’s intelligence agencies are subject to an oversight regime, which we are looking to strengthen,” she said.

(Additional reporting by Andreas Rinke and Michelle Martin in Berlin, Rob Taylor in Canberra and Naomi Tajitsu in Wellington; Writing by Peter Graff; Editing by Kevin Liffey)

[An illustration picture shows the logo of the U.S. National Security Agency on the display of an iPhone in Berlin]