The state-backed Deutsche Telekom wants to shield Germany’s Internet traffic from foreign intelligence services and it wants German communication companies to cooperate, Reuters reports.

In the meantime, the U.S. and Europe are disputing spying accusations. Germany said Wednesday it had evidence that Chancellor Angela Merkel’s cell phone had been monitored, and on Thursday, Merkel said the incident shattered German trust in the U.S. At a summit of European leaders in Brussels, she demanded that the U.S. make a “no-spying” agreement with Berlin and Paris by the end of the year.

The White House did not deny the bugging, but said it would not happen again. President Barack Obama then spoke with Merkel to assure her she was not under surveillance.

The news shocked Germans, whose national history is haunted with state surveillance and secret police.

But experts are saying Deutsche Telekom’s proposed shielding would not work when Germans surf on websites hosted on servers abroad, such as the ubiquitous Facebook and Google. Deutsche Telekom may also have trouble getting rival broadband providers to cooperate because they are hesitant to share network information, and Deutsche Telekom’s preference for being paid by other Internet networks for carrying traffic to the end user could counter the goal of keeping traffic within Germany. It could be cheaper or free for German traffic to go through London or Amsterdam, where it can be monitored by foreign spies.

In fact, Deutsche Telekom’s plan would disrupt the way the Internet works today. Global traffic passes from network to network under free or paid agreements regardless of national borders.

Web companies usually rely on a few large data centers to host their entire operations, and they choose locations based on the availability of cheap power, cool climates and high-speed broadband networks, not the location of their customers.

For example, if one German resident emailed another German resident through Google’s Gmail, the email would probably be routed through one of Google’s data centers in Finland, Belgium or Ireland. The only way Germany could alter this would be to require local hosting of websites, a drastic (and expensive) change that German leaders have not yet proposed.

If more countries follow Germany’s lead and try to cut themselves off, it could lead to a troubling “Balkanization” of the Internet, crippling the openness and efficiency that have made the Internet a source of economic growth, a U.S. security researcher, Dan Kaminsky, told Reuters.

Brazil’s president Dilma Rousseff, angered that the U.S. spied on her and other Brazilians, is pushing legislation that would force Google, Facebook and other Internet companies to store locally gathered or user-generated data within the country’s borders.

The European Parliament discussed on Monday toughening a data-privacy law that has evolved in the past two years, but the law still requires agreement by member states.