> What they do mind is when they themselves are being spied upon

That's what SIGINT is.

> Like Merkel's phone being tapped.

Which is an example of SIGINT. And it was leaked which is why it became an issue. World leader's are always surveilled.

There's a certain level of aggression you use against acknowledged enemies that would be awkward if exposed against allies, that is not to say it doesn't still happen.

Oh, my bad at that, got a brain fart I suppose. Sweeped surveillance (which is usually SIGINT) is not minded, and often the backbone of programmes such as Five Eyes relies on that. Targeted surveillance (SIGINT cases that I mentioned) and espionage (mostly HUMINT) is frowned upon. HUMINT is especially frowned upon since it means you're actively investing in recruiting citizens against their government, and the intel is usually much more valuable and more expensive to garner. HUMINT Intel isn't practiced between staunch allies either, but maybe between uneasy allies and enemies.

> HUMINT Intel isn't practiced between staunch allies either

It most certainly is https://en.wikipedia.org/wiki/Jonathan_Pollard

But it's rare and usually conditional. Large sections of the US IC still haven't forgiven Israel for Pollard.