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MAINZ, Germany -- The United States' relationship with its close ally Germany has hit a new low, a leading German official said ahead of President Obama's much-anticipated speech on the government's controversial surveillance methods.

"The current situation in transatlantic relations is worse than it was at the low-point in 2003 during the Iraq War," said Philipp Missfelder, coordinator for transatlantic relations in Germany's foreign office.

In 2003, former German Chancellor Gerhard Schroeder’s outspoken objections to the U.S.-led invasion in Iraq caused severe friction between the two countries.

Revelations that the National Security Agency (NSA) spied on its allies, including eavesdropping on current Chancellor Angela Merkel's personal cellphone, have eroded ties further still, he said.

"There is enormous disappointment on the German side," said Missfelder, who is the foreign policy spokesman for Merkel's conservative CDU party.

Earlier this week, several media outlets reported that an anticipated "no spy" agreement between Berlin and Washington was on the verge of collapse, sparking denials from both sides.

Germany's Sueddeutsche Zeitung daily newspaper quoted unnamed sources (link in German) close to Germany's Federal Intelligence Service, BND, as saying the NSA has shown little flexibility.

"We still have hope that a no-spy agreement with the U.S. is possible," Missdelder said. "But given the high level of lost trust and the weak signals from the U.S., it will be very difficult to accomplish."

Earlier this month Merkel, furious about her phone being tapped for years, accepted an invitation from Obama to come to Washington. A date for the trip has not been set yet, but her government is hopeful.