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Anger mounts as Germany unearths second U.S. spy suspect

By Thorsten Severin and Mark Hosenball

BERLIN/WASHINGTON (Reuters) - German politicians reacted angrily on Wednesday to news of a suspected U.S. spy in the defense ministry, which came days after the arrest of a German foreign intelligence agency worker as a suspected CIA informant.

After the federal prosecutors said authorities had conducted searches in connection with a second spying case, Chancellor Angela Merkel's coalition partners said Washington should remove any U.S. embassy staff involved and cease spying on its ally.

Security sources told Reuters the latest suspect to face investigation was from the military and worked in the Defence Ministry in Berlin, but no arrest appeared to have been made. Other sources close to the investigation said the suspect was a German Foreign Ministry official on assignment at the Defence Ministry.

The Defence Ministry confirmed its premises had been searched but gave no other details.

"It is not yet clear what is behind this," Defence Minister Ursula von der Leyen told the Berliner Zeitung newspaper, in an excerpt of Thursday's edition.

Merkel has already said the arrest last week of a low-level official of Germany's foreign intelligence agency, known as the BND, for spying for the United States would, if confirmed, be a "serious case". But she also says it will not affect transatlantic free trade talks.

The chancellor faces political fallout for not criticizing President Barack Obama sufficiently for alleged surveillance in Germany by the U.S. National Security Agency, which targeted her mobile phone for eavesdropping. The new cases put further pressure on Merkel to react.

Yasmin Fahimi, general secretary of the Social Democrats (SPD) who share power with Merkel's conservatives, urged the "immediate removal of embassy staff involved and the immediate cessation of all other espionage in our country".

Von der Leyen, who is from Merkel's party, said the NSA case had "shaken confidence" in the United States and it had to be made clear to the intelligence community that "not everything that is possible is politically acceptable".

"DEEP DIFFERENCES OF OPINION"

Merkel's spokesman Steffen Seibert acknowledged there were "deep differences of opinion" with the United States on how to balance the need for security with civil rights, though German officials stress they are heavily reliant on U.S. intelligence.

The 31-year-old BND agent arrested last week admitted to passing documents to a U.S. contact, including details of a parliamentary committee's investigation of former U.S. intelligence contractor Edward Snowden's allegations of American spying in Germany.

The CIA and other U.S. government agencies declined to comment on the cases. However, U.S. officials acknowledged to Reuters that the CIA had been involved in recruiting the BND official as an informant, and did not dispute German media reports that his initial recruitment occurred two years ago.

On Wednesday, John Emerson, the U.S. Ambassador in Berlin, visited the German foreign ministry at his request to discuss the spy uproar, U.S. and German officials said.

A U.S. official said CIA director John Brennan also would be in telephone contact with Klaus-Dieter Fritsche, the foreign intelligence coordinator in Merkel's office.

Brennan has also briefed leaders of both the U.S. Senate and House Intelligence committees about the controversy.

U.S. officials confirmed that neither Obama nor Merkel mentioned the BND official's arrest, which occurred on July 2, in a telephone discussion they held on July 3. The officials did not dispute a New York Times report which said, at the time of the call, Obama had not been made aware of the alleged CIA informant's arrest in Germany.

The new spy case, reported on Wednesday, is believed to be more serious than last week's, Sueddeutsche Zeitung daily said in an advance copy of Thursday's edition.

Ties between Berlin and Washington have been strained by Snowden's allegations and the opposition Greens said it was now even more important that he testify in person, rather than by video link, before the parliamentary committee probing NSA activities.

Merkel's conservatives are reluctant to bring him to Germany from asylum in Russia, which could anger the Americans who want Snowden to stand trial for treason.

Merkel said on Wednesday that there were talks with the United States, but she could not comment on their content.

Surveillance is a sensitive issue in Germany, where the memory of the Nazi's Gestapo secret police and Communist East Germany's Stasi means the right to privacy is treasured.

After the Snowden revelations, Berlin demanded Washington agree to a "no-spy agreement," but the United States was unwilling to make such a commitment.

(Additional reporting by Sabine Siebold; Writing by Stephen Brown; Editing by Ruth Pitchford, Jason Szep and Gunna Dickson)

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