Responding to Germans' unease over U.S. surveillance of the Internet, Chancellor Angela Merkel's cabinet agreed initial plans on Wednesday to boost European technology companies and make them a more favorable alternative to U.S. peers.

Merkel's chief of staff said on Monday that fears of mass U.S. spying on Germans were unfounded, and Washington had assured Berlin it had upheld German law. But with an election looming in less than six weeks, the government has come under pressure to do more to protect citizens' private data.

"We need a strong European information technology industry which can offer alternatives," said Economy Minister Philipp Roesler. Among ideas to be explored, he listed more secure cloud computing and better links between technology start-ups and established industry.

First results would be discussed at a IT summit in Hamburg in December, he said.

A former U.S. security contractor, Edward Snowden, set off an international furor when he told newspapers in June that the National Security Agency was mining the personal data of users of Google, Facebook, Skype and other U.S. companies under a secret program codenamed Prism.

President Barack Obama last week announced plans to limit the sweep of government surveillance programs and make them more transparent.

Snowden, facing espionage charges back home, has been granted a year's asylum in Russia.

The German cabinet also agreed to negotiate with the European Commission on tightening EU data protection laws, and to pursue a "no-spy deal" with Washington, whose details are as yet unspecified.

Merkel's conservatives are still tipped to win the September 22 federal election, with opinion poll ratings at 40 percent, some 17 points ahead of the opposition Social Democrats (SPD). It is less clear whether Merkel can renew her center-right coalition with the Free Democrats (FDP), who are polling just 5 percent.

(Reporting by Alexandra Hudson; Editing by Mark Trevelyan)

(Source : Reuters)