Merkel said on Saturday that she planned to discuss the idea of a regional network with French President Francois Hollande when the pair meet on Wednesday.
In her weekly video podcast, Merkel said she did not approve of companies like Facebook and Google basing their operations in countries where data protection was compromised.
"Many countries have lower levels of data protection than Germany, and we do not want our privacy laws to be watered down," she said.
"We'll talk with France about how we can maintain a high level of data protection. Above all, we'll talk about European providers that offer security for our citizens, so that one shouldn't have to send emails and other information across the Atlantic."
In response, Hollande's office confirmed that Paris and Berlin had already been discussing the matter, with France also keen on the idea. "It is important that we take up the initiative together," a French official said.
Concern about the activities of the US National Security Agency (NSA) came to the fore last year with the release of information from former NSA contractor Edward Snowden. According to leaked documents, the agency had indulged in "mass surveillance" of electronic communications of European Union citizens. Merkel's own communications were found to have been compromised with the revelation that the chancellor's mobile phone had been monitored.
Berlin has said it is keen to reach a "no spy" agreement with Washington, although this has so far been in vain.
In her podcast, Merkel also said she planned to discuss climate protection with Hollande, ahead of a global climate change conference in France next year. Security policies, particularly with respect to Africa, were also set for discussion.
rc/lw (dpa, Reuters)