A summit of European Union leaders in Brussels today has been overshadowed by a transatlantic spat over  spying. The German magazine Der Spiegel claims that the U.S. snooped on German Chancellor Angela Merkel’s mobile phone.

The allegation that America’s National Security Agency eavesdropped on Merkel’s personal phone conversations could have an economic impact. It seems likely to give fresh impetus to a measure backed by the European Parliament this week. Lawmakers voted to toughen the penalties on domestic and foreign companies that break strict European data protection rules. That could hit U.S. internet companies like Google and Facebook hard.

Gus Hosein of the Privacy International campaign group says the revelations about Merkel’s mobile have made tougher restrictions on transatlantic data flows more likely.

“Now that the heads of state from across Europe are targets for the National Security Agency, they’re going to start taking this matter a hell of a lot more seriously,” Hosein says.    

Some analysts suggest that the Merkel revelations could also complicate talks for a $4 trillion transatlantic free trade deal .