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What can the German government do?

Against the American government nothing of course, but the Brits Germany would be able to put under so much pressure that they would have to break down and compromise. Not only are they bound by the European Human rights convention, that they are blatantly violating, they are also much more dependent on good relations with Germany and have an electorate that is more concerned about how other countries see them.

America I would attack on the commercial angle. Fine companies cooperating with Prism 100 of millions of euros and restrict their access to the European market (Germany can easily lobby for that in Europe... France would be sympathetic anyway and Britain could be outvoted). If you not only do that with Facebook and google (that are by the way already critical of the programm), but also include American manufacturers of telecommunications equipment and telecoms companies you might make the Leviathan howl a little bit.

The question is how much political capital do you want to extend to that? My guess is none. Germany is profiting enormously from particularily the prism programme. I can count from memory at least 2 instances in which bomb plots by salafists have been foiled in Germany because of information provided by American intelligence. Why make yourself unsafe and lose political capital. Obama is already inexplicably generous to Merkel on many issues(freedom medal,speech in Berlin before election, and of course MOST IMPORTANTLY the US administrations support for the German strategy in the Euro crisis (they could break the strategy by supporting some of the demands of the Southern Europeans more strongly on a world level) and its support for European integration (that administration officials are on public record that they think a British EU exit would be a bad idea is a game changer in European-US relations... a definite move away from the special-relatonship with Britain (My guess is that she supports him a lot on the international stage behind the scenes... Particularily in regards to Israel/Palestine and Russia). If she lets this thing also go, perhaps he lets spring even more American support for Germany.

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