By Erik Kirschbaum
BERLIN, Sept 26 (Reuters) - Political tensions between the German and U.S. governments are straining business ties in the two countries and the row needs to be quickly resolved, the head of a leading German business group said on Thursday.
Ludolf-Georg von Wartenberg, director of the BDI industry association, said German companies were reporting cancelled business in America following Chancellor Gerhard Schroeder's re-election campaign that criticised U.S. policy on Iraq.
"We're seeing the first signs, the first cancellations," von Wartenberg said, adding the scrapped contracts were public sector deals for construction projects and medical equipment.
"If the United States sees Germany as an unreliable partner, that will have an impact on American business views towards German business. I don't want to raise alarm unnecessarily, but we have to be alert. We know Americans are proud and sensitive. Rows that hurt feelings in the government are not helpful."
The president of the American Chamber of Commerce, Thomas Donohue, said in a speech in Berlin he was concerned about the friction between Washington and Berlin caused by "unfortunate words" and also called for the dispute to be quickly resolved.
"The politicians need to resolve the unfortunate circumstances of the last few weeks," he said. "They need to be resolved. We all need to focus on growing our economies. The long-term relations will survive the unfortunate words."
Schroeder's Social Democrats and their Green party allies retained power in an election on Sunday.
The row between two of the world's biggest economic powers started late in the election campaign when the chancellor repeatedly attacked George W. Bush's government for suggesting Iraq President Saddam Hussein needed to be removed.
SNUBBING SCHROEDER
The relations between the United States and the normally reliable Berlin government deteriorated further when Schroeder's parliamentary floor leader compared Bush to a Roman emperor and his justice minister drew an indirect comparison between the methods of Bush and Nazi dictator Adolf Hitler.
The Bush government has snubbed Schroeder's attempts to patch up their differences.
Schroeder's letter of apology for the justice minister's comments went unanswered, and Bush did not offer the usual congratulations to Schroeder on his re-election victory on Sunday, even after Schroeder replaced the minister and parliamentary floor leader.
Defense Secretary Donald Rumsfeld, who said German-American relations were "poisoned" by Schroeder's campaign, rebuffed attempts by Defence Minister Peter Struck to set up a meeting at a NATO gathering in Warsaw earlier this week.
Rumsfeld, who said he didn't have a single minute free for Struck, was asked how Schroeder could repair damage: "We do have a saying in America: if you're in a hole, stop digging. I'm not sure I should have said that. Let's pretend I never said that."
Schroeder's adviser on U.S. affairs, Karsten Voigt, criticised Rumsfeld, saying his behaviour towards Struck was "undiplomatic". He said German political leaders had made mistakes but American leaders were now also making errors.
Schroeder has reportedly tried unsuccessfully to call Bush. German government sources said Schroeder was ready fly to Washington to meet Bush as soon as he gets a welcome signal.
Donohue, speaking at a conference on "How to restore confidence in transatlantic business", pointed out that two-way trade between Germany and the United States totalled some $90 billion. He said 800,000 Germans worked for U.S. companies and the same number of Americans work for German firms.
Ten percent of Germany's exports go to the United States, and the vital car sector that employs about 15 percent of the country's workforce is especially reliant on the U.S. market.
"We shouldn't lose sight of the big picture," Donohue said. "And that is the people of Germany and the United States are close friends and have been for more than a half century."