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By Declan McCullagh, 10 December 2002 16:20

NEWS The German government is worried about federal agencies adopting Microsoft's upcoming Palladium security technology, fearing the system could lead to higher costs. In what appears to be the first time a country has criticised the technology, Germany's Ministry of Economics and Labour said in a letter to the Bundestag, the German parliament, that widespread adoption of Palladium raises the "danger that applications of software for new high-security PCs require a licence by Microsoft, resulting in high costs." The 26 November letter was a response to queries from members of the conservative Christian Democratic Union party. The Palladium architecture relies on future "trusted" hardware for tasks such as limiting piracy and enhancing security. In part, Palladium involves encrypting certain data stored on a hard drive. But critics have said that in addition to keeping hackers away from such data, the technology could be used as a policing mechanism that bars people from material stored on their own computers if they have not met licensing and other requirements. Microsoft's licensing policies have also come under attack. In contrast to the German reaction to Palladium, US cybersecurity czar Richard Clarke said last week that trusted computing proposals were "a good beginning, but it's not enough." Clarke called on technology companies to ensure that future operating systems incorporate security features. The German letter also expressed concern about Palladium's potential to create "substantial obstacles to market entry" to competing operating systems - particularly ones such as Linux that are based on free software. It also mentioned a bill introduced by US Senator Fritz Hollings that would jump-start Palladium by implanting copy-protection technology in PCs and electronic devices. Microsoft said Germany had little to worry about. "The plan is not to have Microsoft be the arbiter of what can and can't run on your PC," Amy Carroll, the group manager for Windows Custom Platform Technology, said. "One of the stated goals of Palladium is to allow the machine owner to maintain control over what they do and do not wish to run." "We're committed to working with the German government and anyone else who wants to talk to us," Carroll said. "Governments in general tend to work with sensitive data and sensitive information and have pretty deep concerns about the security of the information they're working with. Anything that can increase the security of that information is a good thing." Declan McCullagh writes for News.com. News.com's Jonathan Skillings and Robert Lemos contributed to this report.