The chief executive of Europe's largest newspaper publisher has accused Google of abusing a monopoly position in the digital economy to discriminate against competitors and build up a "superstate".

In an open letter to Google's Eric Schmidt published in Wednesday's Frankfurter Allgemeine Zeitung, the head of Germany's Axel Springer SE publishing house, Mathias Döpfner, said the US company was operating a business model that "in less reputable circles would be called a protection racket", discriminating against competitors in its search rankings. Google's motto was "if you don't want us to finish you off, you better pay", he said.

Döpfner – whose publishing portfolio includes Europe's best-selling newspaper, the tabloid Bild, as well as the centre-right broadsheet Die Welt – admitted that his own company was completely reliant on Google, a fact that made him and other publishers scared.

"Google's employees are always decidedly friendly to us and other publishing houses, but we don't communicate on a level playing field. How could we? Google doesn't need us. But we need Google."

Döpfner argued that there had been a "fundamental shift in opinion" about Google among European citizens since Edward Snowden had revealed "close connections between big US online providers and the US intelligence agencies" last year. "No one knows as much about its customers as Google. Even private and business emails are read by Gmail and analysed if the need exists," he said. He described the view, which he attributed to both Schmidt and Facebook's Mark Zuckerberg in response to the NSA revelations, that "if you have nothing to hide, you have nothing to fear", as disconcerting.

"It stands for a mental attitude and a view of the world that is common in totalitarian regimes, not in free societies. The head of the Stasi or any other secret service in a dictatorship could have come out with a line like that."

Referring to Google's recent acquisition of drone manufacturer Titan Aerospace he said: "Is Google really planning a digital superstate ... ? Please, dear Eric, explain to us why this interpretation of what [Google co-founder] Larry Page does and says is just a misunderstanding."

Responding to an opinion piece by Schmidt published in the same newspaper, Döpfner denied that his concerns were born of a "Luddite conspiracy theory".

"To criticise Google is not to criticise the internet. Those who are interested in a flawlessly functioning internet have to criticise Google. For us as a publishing house the internet is not a threat but one of the greatest chances in recent decades."

Döpfner, a former journalist who wrote a PhD thesis on the history of German postwar music criticism before editing a string of newspapers, also took to task the work of the European competition regulators, who in February reached a settlement with Google after investigating the company in an anti-trust inquiry.

"Will European politicians fold or wake up? Institutions in Brussels have never been as important as they are now," he said.

In Germany, Axel Springer has in the past been accused of exercising a monopoly role similar to the one Döpfner accuses Google of benefiting from. Its newspapers' largely conservative views turned the publishing house into one of the main bogeymen of the 1968 student movement.

Recently, Axel Springer SE has expanded to eastern Europe but closed down some of its magazines and local newspapers with the reported aim of concentrating on its expansion as a digital media company.