The United States says it will work with Germany to resolve concerns over whether one of its intelligence employees was a double agent spying for Washington, but is declining to say whether the allegation is true.
White House spokesman Josh Earnest says the U.S. relationship with Berlin is broad and important, but that he could not talk about intelligence matters.
German Chancellor Angela Merkel, on a visit to Beijing, said the spy allegation is "serious," and if true would violate the trust between Germany and the United States.
"About the reports that a German intelligence employee spied for the United States, if the reports are proven true it would be a serious case," she said. "The German federal prosecutor is investigating on this case. If the allegations are true, it would be for me a clear contradiction as to what I consider to be trusting cooperation between agencies and partners."
The comments marked the chancellor's first public remarks on the arrest last week of the 31-year-old man suspected of being a double agent. When questioned, authorities say he told them he had been working for the United States for two years.
German authorities have described the suspect as a low-level employee of Berlin's foreign-intelligence agency. He was detained after allegedly being pinpointed as the author of an email offering to sell secret documents to Russia.
He is believed to have copied more than 200 German intelligence documents and sold them to the United States for $34,000.
The case risks further straining ties between the two allies, following the revelations last year of wide-spread spying on Germany by the U.S. National Security Agency, including monitoring of Merkel's cell phone.
Surveillance is a sensitive issue in Germany, where memories of the Nazi's Gestapo secret police and communist East Germany's Stasi ensure the right to privacy is treasured.
As Merkel visited China, where she oversaw the signing of agreements involving Airbus Group NV's helicopter division selling 100 aircraft to Chinese companies, a German intelligence chief warned that some firms in China faced a growing threat from industrial espionage by Chinese government agencies with huge resources.
"Germany is against that - regardless of where it comes from," Merkel said, in reference to industrial espionage.
"We have a duty as the state to protect our economy. ... We are for the protection of intellectual property," she said.
China's premier repeated his government's denial that it was involved in such activities.
"China and Germany, it can be said, are both victims of hacking attacks. The Chinese government resolutely opposes hacking attacks as well as the use of the internet to steal commercial secrets or intellectual property," Li said.
"China will engage in dialogue and consultation to protect the security of the Internet," he added
Some information for this report provided by Reuters and AP.